This month’s national accounts show, relative to earnings, wages slumping to lowest on record. Compared to the rest of the developed world, Australia is now in record low territory when it comes to sharing the nation’s largesse with its workers. Alan Austin reports.

THE BRIGHT red corn poppy of Poland is now in full bloom. So is its economy. The former Soviet state is now a solid mixed capitalist economy. It gave workers a thumping 7.7 per cent pay rise over the last year, or 5.3 per cent after inflation. It was rewarded with annual growth in gross domestic product (GDP) of 4.7 per cent. The jobless rate fell to 5.6 per cent, down from 6.3 per cent a year ago, and way below 13 per cent five years ago. Blooming brilliant.

More than twenty developed countries across the globe have released their wage levels for the first quarter of 2019. Some enhance the garden more than others.

Time for workers to share the proceeds

Of the 26 countries for which we have reliable data going back to 2009, all except Japan recorded wage rises in this year’s first quarter. This confirms times are about as right as they have ever been for employees to be given a fair share of the world’s fruits.

We can see from the blue chart which economies offered the greatest wage rises. These nations are now enjoying exceptional growth in GDP and jobs. This is precisely what progressive economists expect — based on the findings that higher disposable incomes among lower and lower-middle income earners inevitably boost retail trade. This then flows through to wholesalers, importers, manufacturers, primary producers, transport and service providers. And then well beyond.

Winners with wages

Hungary hiked wages by 10.2 per cent, or 6.3 per cent after inflation. Its annual GDP growth is the highest in the OECD at 5.3 per cent and the jobless is an impressive 3.5 per cent. That’s down from 8.5 per cent five years ago and the lowest ever recorded.

Estonia awarded its workforce rises of 4.4 per cent after inflation. Its annual GDP growth reached 4.5 per cent and the jobless rate tumbled to 4.7 per cent, down from 6.8 per cent a year ago.

Workers in the USA gained a 2.4 per cent real pay rise. Annual GDP growth remained steady at 3.2 per cent and the jobless rate also held at the historic low 3.6 per cent.

Other countries to reward workers and see strong growth in return included Norway, Ireland, Portugal, Slovenia, the Czech Republic, Slovakia, Ukraine and Croatia.

Australia among the losers

At the other end of the chart, Japan could not – or chose not to – increase pay packets over the last year. Its annual GDP growth is now a miserable 0.9 per cent. Its jobless rate is still at a creditable 2.4 per cent, but above recent lows of 2.3 and 2.2.

Australia is towards the low pay rise end of the 2019 chart having allowed only 2.3 per cent more, or just 1.0 per cent after inflation. As well documented here and elsewhere, Australia’s economy overall – including jobs and growth – has now tumbled to an all-time low relative to the rest of the developed world.

The fact that Australia is in record low territory for sharing the nation’s largesse with workers is confirmed by the Australian Bureau of Statistics (ABS). This month’s national accounts [File 5206.0, table 7] show Australia is now in the worst wages slump – relative to total earnings – since records were first published in 1959.
This document measures total labour compensation as a percentage of the nation’s total gross domestic product. This includes wages, salaries, superannuation contributions by employers and other remuneration for work done.

The percentage for the 2019 first quarter was a dismal 46.72. This was down from 46.82 the quarter before and below 47.00 one year earlier. This is just a poofteenth above the 46.39 in the first quarter of 2017. That was the lowest. Ever.

Never before have there been four consecutive quarterly results below 47.00 per cent. In other words, the share of all earnings going to workers – leaving the rest for corporate profits and government revenue – was lower than 47 per cent for four straight quarters. First time.

What global economic headwinds, Mathias?

Lessons from recent history

The level in the first quarter of 2013 – Labor’s last year – was 48.15 per cent, well above the ten-year average of 47.70 and also higher than the twenty-year average of 48.00. The peak, incidentally, was 58.37 back in 1975, Gough Whitlam’s last year.

It was not always like this. As documented elsewhere, Australia had the best-performed economy throughout the period 2009 to 2013. If wage rises boost the economy by increasing retail sales and then the flow-on activity, we would expect Australia to have been a leader in wage sharing through the global financial crisis.

And indeed it was. The grey chart shows wage rises ten years ago, in 2009. All developed economies were then battling the worst global economic turmoil in eighty years.

Despite this, or maybe because of it, some countries increased wages dramatically.

In fact, 19 of the 26 countries for which we have comparable data increased wages over the previous year, as did the European Union. Not all of these were real pay rises after inflation, however. Another seven chose or were forced to cut wages. Of these Japan, Belgium, the USA and Iceland did so savagely.

Australia increased wages in 2009 by 4.2 per cent, or 1.8 per cent in real terms. This ranked eighth among comparable economies.

The Rudd/Gillard Labor governments maintained wages as an intentional strategy. So by the first quarter of 2013, Australia’s workers were among the developed world’s most fortunate with pay rises ranked in the top four.

These facts and figures – both from the ABS and from comparable countries – directly challenge the policies of the organisations which spruik wage reduction or minimal rises as the means to prosperity. These include Coalition governments, some minor parties, the Australian Industry Group, state chambers of commerce and industry, the retailers’ and caterers’ peak bodies and various think tanks, academic departments and mainstream media outlets.

The bodies urging greater share for workers have the evidence on their side. These include the Australia Institute, the trades unions, the Catholic Bishops Conference, Labor governments, the Greens and some minor parties and several alternative media outlets.

This is the time to give workers a fair share. Then watch the economy blossom. Like Summer in Poland.

Data Dumped: it’s all bad news for the Australian economy

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Alan Austin

Alan Austin is a freelance journalist with interests in news media, religious affairs and economic and social issues.

You can follow Alan on Twitter @alanaustin001 .

 

Fact check: Employment in Australia is worse than you think

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