Open letter on the benefits of promoting faster wage growth

Signed by 124 labour market, employment relations and labour law researchers 19 March 2019

“For the last several years, Australian wages have experienced an unprecedented slowdown. Nominal wages have been growing at only about 2% per year since 2015. That’s barely half the traditional pace of growth experienced over the preceding 50 years – and the slowest sustained rate of wage growth since the end of the Second World War. Nominal wages have barely kept up with consumer prices; for many Australian workers, the real purchasing power of their incomes has declined.

This has occurred despite official labour market indicators (such as employment growth and the unemployment rate) that seem, on the surface, relatively healthy. And despite official assurances that an acceleration of wage growth is imminent, there is no clear indication of any significant or lasting rebound. The most commonly-reported wage measure (the ABS’s Wage Price Index) actually showed a slight slowing of wage growth in the December quarter; other measures also indicate continued weakness.

The consequences of this unusually slow wage growth are many and varied, and include: weaker consumer spending, greater household indebtedness and financial stress, slower growth in government revenues, and widening inequality. In our judgment, the deceleration of wage growth is due in significant part to the impact of deep structural and institutional change, and cannot be explained as a normal outcome of market forces.

These structural and institutional factors include wage suppression by governments (affecting not just the public sector, but businesses or non profit organisations reliant on public funding or procurement), the erosion of collective bargaining, the expansion of precarious for of employment (including independent contracting, temporary work, labour hire and gig work), and so-called “wage theft”. These are not the only reasons for the slowdown in wages, but they are important ones.

An important public conversation has been sparked in Australia regarding how to address and reverse wage stagnation. In our judgment, waiting for market forces to restore normal wage trajectories is not likely to be effective. Instead, reversing the stagnation of wages will require positive policy action to strengthen institutional supports for higher wages.

Indeed, various proposals have been recently advanced to strengthen those wage supporting institutions and policies: including measures to raise (and better enforce) minimum wages, strengthen collective bargaining, relax wage caps on public sector workers, and constrain the ability of businesses to avoid or outsource normal employment responsibilities.

If those proposals are implemented, in whole or in part, we expect they would support a moderate but meaningful improvement in wage growth in future years, lifting wage increases back above consumer price inflation and towards traditional benchmarks (of 3.5-4% per year). This in turn would have positive impacts on consumer spending, aggregate demand, economic growth, fiscal balances, and equality. Policy statements from bodies such as the Reserve Bank of Australia, the Treasury, and others also indicate the positive value of faster wage growth. And while any individual employer may think it benefits from lower (not higher) wages, collectively even the business community has a stake in the stronger purchasing power and community cohesiveness that comes with rising wages.

Some analysts and organisations have expressed concern and even alarm about the prospect of a recovery in wage growth, suggesting this would constitute a threat to Australia’s economic stability and success. We find these arguments puzzling and unconvincing.

There is a growing consensus among labour market analysts and practitioners that wages today in Australia are too low, not too high. Hence Australia’s economic prospects would be enhanced by policies to boost wage growth. We believe that stronger wages in the future would contribute to a stronger, more balanced and fairer Australian economy.”

Letter initiated by:

Professor Andrew Stewart, John Bray Professor of Law, Adelaide Law School

Dr Jim Stanford, Economist and Director, Centre for Future Work

Dr Tess Hardy, Senior Lecturer and Co-Director, Centre for Employment and Labour Relations Law, University of Melbourne

Signatories to open letter

Dr George Argyrous, Senior Lecturer, University of New South Wales
Prof Christopher Arup, Adjunct Professor, Business Law Department, Monash University
Prof Tony Aspromourgos, Economist, University of Sydney
Prof Greg Bamber, Professor Co-Director, International Consortium for Research in Employment and Work (iCREW), Centre for Global Business, Monash Business School
Dr Larissa Bamberry, Senior Lecturer School of Management and Marketing Faculty of Business, Justice and Behavioural Sciences, Charles Sturt University
Dr Tom Barnes, Senior Research Fellow Institute for Religion, Politics & Society, Australian Catholic University
Dr Tim Battin, Senior Lecturer, University of New England
Dr Michael Beggs, Senior Lecturer in Political Economy, University of Sydney
Dr Laurie Berg, Senior Lecturer, University of Technology Sydney
Dr Alysia Blackham, Associate Professor, Melbourne Law School, University of Melbourne
Dr Pauline Bomball, Senior Lecturer, ANU Law School Australian National University
Prof Paul Boreham, Emeritus Professor, Institute for Social Science Research, University of Queensland
Josh Bornstein, Principal Lawyer, Maurice Blackburn
Prof Mark Bray, Professor of Employment Studies, Newcastle Business School, University of Newcastle
Prof Cathy Brigden, Professor, RMIT University
Dr Gareth Bryant, Lecturer, Departent of Political Economy, University of Sydney
Prof John Buchanan, Chair of Discipline Business Analystics, Business School, University of Sydney
Renee Burns, Executive Director, Australian Institute of Employment Rights
Dr Iain Campbell, University of Melbourne
Rod Campbell, Research Director, The Australia Institute
Prof Anna Chapman, Associate Dean (JD), Melbourne Law School, University of Melbourne
Prof Sara Charlesworth, RMIT Distinguished Professor, Professor of Gender, Work & Regulation / Deputy Head of School Research & Innovation, School of Management, Centre for People, Organisation & Work (CPOW), RMIT University
Dr Lynne Chester, Associate Professor, University of Sydney
Prof Anis (Anisuzzaman) Chowdhury, Adjunct Professor, University of New South Wales and Western Sydney University
Assoc Prof Linda Colley, Discipline Leader, HRM School of Business and Law, CQUniversity
Dr Joe Collins, Academic Fellow in Political Economy, University of Sydney
Dr Natasha Cortis, Senior Research Fellow, Social Policy Research Centre, University of New South Wales
Dr Peter Davidson, Senior Adviser, Australian Council of Social Service
Emma Dawson, Executive Director, Per Capita
Dr Richard Denniss, Chief Economist, The Australia Institute
Dr Corrado Di Guilmi, Senior Lecturer, Economics Discipline Group, University of Technology Sydney
Prof Robert Dixon, Honorary Professor, Department of Economics, University of Melbourne
Dr Geoff Dow, Associate Professor, School of Political Science, University of Queensland
Prof Bradon Ellem, Professor of Employment Relations Work and Organisational Studies, The University of Sydney Business School
Dr John Falzon, Senior Fellow, Inequality and Social Justice, Per Capita
Prof Karen Fisher, Professor, Disability Research Program, Social Policy Research Centre, University of New South Wales
Dr Frances Flanagan, University of Sydney Fellow, Work and Organisational Studies, University of Sydney
Prof Anthony Forsyth, Professor, Graduate School of Business & Law, RMIT University
Prof Beth Gaze, Professor, University of Melbourne Law School
Dr Gabrielle Golding, Lecturer, Adelaide Law School, University of Adelaide
Dr Caleb Goods, Lecturer, Department of Management & Organisations, UWA Business School, University of Western Australia
Prof Roy Green, Emeritus Professor, Innovation Adviser, University of Technology Sydney
Egbert Groen, Sessional Lecturer, Newcastle Law School, University of Newcastle
Matt Grudnoff, Economist, The Australia Institute
Prof GC Harcourt ,Professor Emeritus, University of New South Wales
Dr Tess Hardy, Senior Lecturer and Co-Director Centre for Employment and Labour Relations Law, University of Melbourne
Peter Harkness, Former Senior Lecturer, Economics and Business, Swinburne University
Troy Henderson, Economist, Centre for Future Work at The Australia Institute
Prof John Howe, Director Melbourne School of Government, University of Melbourne
Dr Joanna Howe, Associate Professor in Law, University of Adelaide
Dr Elizabeth Humphrys, Social Scientist, Social and Political Sciences, University of Technology Sydney
Dr Boyd Hunter, Associate Professor, Australian National University
Russell Jackson, RJ Industrial Services
Prof Richard Johnstone, Professor School of Law, Queensland University of Technology
Dr Evan Jones, Economist Department of Political Economy, University of Sydney
Prof P.N. Raja Junankar, Adjunct Professor, Industrial Relations Research Centre, University of NSW
Dr Anne Junor, Honorary Associate Professor, University of NSW
Dr Sarah Kaine, Associate Professor Research Director: Future of Work, Organising and Enterprises, Centre for Business and Social Innovation (CBSI), University of Technology Sydney
Prof Steve Keen, Honorary Professor, University College London and ISRS Distinguished Research Fellow
Nicholas Kimberley, Australian Catholic University
Prof John King, Emeritus Professor, La Trobe University and Federation University
Dr Peter Kriesler, Associate Professor, School of Economics, University of New South Wales
Damian Kyloh, Associate Director of Economic and Social Policy, Australian Council of Trade Unions
Ingrid Landau, Lecturer, Department of Business Law & Taxation, Monash Business School, Monash University
Prof Russell Lansbury, Emeritus Professor, University of Sydney Business School
Dr Stephane Le Queux, Senior Lecturer in Employment Relations, James Cook University
Tim Lyons, Research Fellow, Per Capita
Dr Fiona Macdonald, Senior Research Fellow, RMIT University
Prof Johanna Macneil, Professor Employment Relations/HRM Discipline, Newcastle Business School, University of Newcastle
Prof Raymond Markey, Emeritus Professor of Employment Relations, Faculty of Business and Economics, Macquarie University
Prof Robert Marks, Professor Emeritus Economics, University of NSW
Dr Shelley Marshall, Vice Chancellor’s Senior Research Fellow, RMIT University
Prof Greg Marston, Professor of Social Policy, Head of School, School of Social Science, University of Queensland
Alison McClelland AM Social Policy Consultant
Dr Shae McCrystal, Professor of Labour Law; Deputy Dean and Deputy Head of School, University of Sydney Law School
Prof Paula McDonald, Professor of Work and Organisation, QUT Business School, Queensland University of Technology
Dr Ian McGregor, Lecturer, Department of Management – UTS Business School, University of Technology Sydney
Dr Margaret McKenzie, Economist Australian Council of Trade Unions, and Federation University
Dr Gabrielle Meagher, Professor Department of Sociology, Macquarie University
Dr Alex Millmow, Associate Professor in Economics, Federation Business School
Prof Richard Mitchell, Professor in Labour Law, Monash University
Dr Cameron Murray, Visiting Scholar, University of Sydney
Dr Terri Mylett, Lecturer in HRM/Industrial Relations School of Business, Western Sydney University
Dr Matt Nichol, Lecturer Department of Business Law & Taxation, Monash Business School, Monash University
Anthony O’Donnell, Senior Lecturer School of Law, La Trobe University
Prof Rod O’Donnell, Economist, University of Technology Sydney
Dr Patrick O’Leary, Lecturer Federation Business School, Federation University
Dr Alice Orchiston, Lecturerm University of New South Wales
Adriana Orifici, Lecturer, Monash Business School, Monash University
Prof David Peetz, Employment Relations, Griffith University
Dr Michael Pegg Industrial Relations Consultant
Alison Pennington, Economist, Centre for Future Work at The Australia Institute
Prof Alison Preston, University of Western Australia
Prof John Quiggin, ARC Australian Laureate Fellow, School of Economics, University of Queensland
Dr Patricia Ranald, Convener, Australian Fair Trade and Investment Network
Dr Michael Rawling, Senior Lecturer, Faculty of Law, University of Technology Sydney
Prof Alexander Reilly, Director Public Law and Policy Research Unit, Adelaide Law School, University of Adelaide
Dr Susan Ressia, Lecturer, Department of Employment Relations and Human Resources, Griffith University
David Richardson, Senior Research Fellow, The Australia Institute
Dr Stuart Rosewarne, Honorary Associate Professor, Department of Political Economy, University of Sydney
Dr Peter Ross, Honorary Senior Lecturer, School of Humanities and Languages, University of New South Wales
Dr Kerrie Saville, Senior Lecturer Department of Management, Faculty of Business & Law, Deakin University
Dr Robyn Seth-Purdie, Senior Analyst, Prevention and Equity UnitingCare Australia
Prof Rhonda Sharp, Emeritus Professor AM, University of South Australia
Dr Christopher Sheil, Senior Fellow School of Humanities and Languages, Faculty of Arts and Social Sciences, University of New South Wales
Prof Peter Sheldon, Director Industrial Relations Research Centre, Business School, University of New South Wales
Assoc Prof Meg Smith, Deputy Dean, School of Business, Western Sydney University
Warwick Smith, Senior Economist, Per Capita
Tilly South, Director, Interns Australia
Assoc Prof Ben Spies-Butcher Head, Department of Sociology, Macquarie University
Prof John Spoehr, Director, Australian Industrial Transformation Institute, Flinders Business, School
Dr Jim Stanford, Economist, Centre for Future Work at The Australia Institute
Prof Andrew Stewart, John Bray Professor of Law, Adelaide Law School, University of Adelaide
Prof Frank Stilwell, Professor Emeritus in Political Economy, University of Sydney
Dr Tony Stokes, Greenacre Educational Publications
Prof Carolyn Sutherland, Director, Labour, Equality and Human Rights Research Group (LEAH) Department of Business Law & Taxation, Monash Business School, Monash University
Dr Helen Szoke, Chief Executive, Oxfam Australia
Prof Joo-Cheong Tham, Professor, Melbourne Law School, University of Melbourne
Assoc Prof Louise Thornthwaite, Deputy Director, Centre for Workforce Futures, Macquarie University
Dr Trish Todd, Honorary Senior Research Fellow, University of Western Australia
Dr Phillip Toner, Senior Research Fellow, Department of Political Economy, University of Sydney
Dr Gerry Treuren, Senior Lecturer, School of Management, University of South Australia
Prof Beth Webster, Pro Vice Chancellor (Research Policy and Impact) Director, Centre for Transformative Innovation. Swinburne University of Technology
Prof Eileen Willis, Emeritus Professor, Flinders University, College of Nursing and Health Sciences, Discipline
Dr Shaun Wilson, Associate Professor, Macquarie University