Australia no lucky country for workers as pay stagnates

Australia has created 1m jobs over five years and its economy is growing at a healthy 3.1 per cent a year, but for workers the “lucky country” has lost some of its shine. Wages growth is stuck near record lows and household debt is among the highest in the developed world.

Average wages grew 2.1 per cent in the year to the end of March, below the 3.5 to 4 per cent levels that Australians enjoyed during a decade-long commodities boom that ended in 2013.

This is causing concern at the Reserve Bank of Australia, which has warned that weak household income growth and high debt posed a risk to the economy. “The crisis is really in wage growth,” Philip Lowe, the RBA governor, cautioned last year as he implored workers to demand higher wages to stimulate the economy.

Australia is emerging from a slowdown caused by the end of a resources boom. But despite the unemployment rate falling from a decade-long high in mid-2014 of 6.4 per cent to 5.5 per cent and a surge in corporate profits, wages are stagnating when adjusted for inflation. 

This trend is making wage growth and workers’ rights key battleground issues as the country prepares for a general election later this year or early in 2019. 

Line chart showing year-on-year % change in wage growth in Australia

Lacklustre wage growth is a familiar theme in western countries, with workers experiencing modest pay rises in spite of low unemployment. There is a vibrant debate over the causes, with economists pointing to intensifying competition, technology, the gig economy, migration and changes to industrial relations laws. 

In Australia there is a sharpening focus on the changing structure of employment, particularly casualisation of the workforce. It has the third-largest share of part-time workers among the 34 OECD member countries, behind the Netherlands and Switzerland. Some economists warn this factor is undermining the bargaining power of workers.

“Insecure work in various forms, whether it is part-time, casual, or marginal self-employment, pays badly relative to standard jobs,” said Jim Stanford, director of the Centre for Future Work at the Australian Institute, a think-tank. 

The centre published a report last month showing that for the first time in history less than half of Australians held a permanent full-time job. “Temporary, casual, and irregular workers have no significant bargaining leverage to ask for higher wages,” Mr Stanford said.

The explosion of delivery riders on Sydney’s roads is a visual example of the expansion of the gig economy. Foodora, Uber Eats and Deliveroo have established thriving businesses in Australia based on the premise that riders are independent contractors rather than employees.

That means they do not benefit from statutory protections such as the minimum wage, holiday pay and pensions. “Many of the riders that I work with are struggling and survive on plain rice or tomato sauce sandwiches for lunch,” said Avi Winner, a delivery rider.

He said riders were paid about A$7 ($5.30) a delivery and many did not make near Australia’s minimum wage of A$18.29 an hour as they could not make more than two deliveries an hour. Many, he added, were migrants who were desperate to keep their jobs and did not complain for fear it would affect their visas. 

Trade unions say the casualisation of the workforce is undermining their influence, despite their ties to the Labor party, which has been in opposition since 2013. Just 15 per cent of workers in 2016 were union members, compared with 40 per cent in 1992, denting their ability to bargain with employers.

Australia has some of the most restrictive rules on the right to strike in the western world and reforms by conservative governments have weakened organised labour, say unions.

The Australian Council of Trade Unions, the national umbrella group, is running a “Change the Rules” campaign, aiming to limit the use of casual employees, boost safeguards for people working in the gig economy and strengthen the industrial relations framework. 

“In Australia, we do not want and we will not accept the Americanisation of our working lives,” said Sally McManus, the ACTU secretary. 

The Liberal-National coalition rejects union claims on casualisation, pointing to the Australian Bureau of Statistics data showing that casual jobs comprise a quarter of the workforce — the same proportion as 1997.

“The lie is that the rate of insecure work in this country is lifting. It’s not. It’s completely where it was 20 years ago,” said Craig Laundy, Australia’s workplace relations minister. 

But economists say ABS data on casualisation is not definitive because it relies on a narrow definition of casual work — solely on entitlement to paid leave.

“The data are very slippery due to the different definitions of what constitutes casual work and insecure work,” said Jeff Borland, an economist at the University of Melbourne, adding that casual work has a precise meaning in Australia that would not include most gig workers. 

The consequences of low wage growth are not restricted to workers. Mr Lowe, RBA governor, has warned of a cascade effect whereby it contributes to weak inflation, which keeps interest rates at record low levels — a trend that pushes up asset valuations and social inequality. 

Weak wage growth also damps spending by households and restricts income tax collection by the government, which is betting on a rapid recovery of wages growth to 3.25 per cent by 2019-20 to meet its pledge to return the budget to surplus. 

It also poses a risk to industrial peace. Last month, Australia stopped printing money for the first time in 107 years due to a strike at Note Printing Australia, a wholly owned subsidiary of the RBA. Workers are demanding a pay rise of at least 3.5 per cent and have rejected an offer of 2 per cent.

“The RBA is lecturing businesses on the need to lift wages but is refusing to offer its own workers a decent raise,” said Tony Piccolo, regional secretary of the Australian Manufacturing Workers’ Union. “Governor Lowe needs to practice what he preaches.”

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Australia no lucky country for workers as pay stagnates

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