Australia’s broken wages bargain

In Australia, for the last generation, wealth has been trickling up. And during the pandemic, that trickle up became a torrent.

Have you noticed your once-adequate salary has fallen behind? ACTU Secretary Sally McManus, in conversation with economist Dr Jim Stanford, explains how it happened and what needs to change.

No matter how you slice or dice it, the picture for salaries in Australia is bleak. “Wages are utterly stuck in the mud,” said Australian Council of Trade Unions (ACTU) Secretary Sally McManus.

In a special online event in July, attended by some 750 unionists and academics, McManus and Dr Jim Stanford, Director of the Centre for Future Work at the Australia Institute, traced the nation’s trajectory to wage stagnation – and the path out.

Salaries haven’t always been so stymied. “For most of the past few decades, wages did allow gradual improvements in the real standard of living for most workers,” McManus said. “But the data tells us something changed around the end of 2013.”

Let's cast our minds back. In 2013, the Liberal/National Coalition, led by Tony Abbott, came to power. “Since late 2013, according to the Australian Bureau of Statistics’ Wage Price Index, nominal wages across the whole economy have grown at an annual average rate of 2%,” McManus said. “Wage growth in the private sector has been even weaker.”

Just two years before, in 2011, NSW employees had maximum annual increases of 2.5% imposed upon them when the NSW Liberal government, under Premier Barry O’Farrell, stripped the NSW Industrial Relations Commission of its autonomy: the IRC could no longer award pay rises above the state government’s salary cap. In the same year, the state government legislated a 2.5% salary cap on public sector wage increases. The course for many teachers and support staff was set.

Now, let's cast our minds back to when teachers’ unions could take work value cases to the IRC. They only did this every decade or so, and they won substantial gains. In 1970, they were awarded a 21% to 24% salary increase; in 1980, it was 9.5% over nine months; in 1991, it was 9% to 13% and for principals and deputy principals it was 20% to 29% over seven months. In 2003-04, it was 12% to 19.5%.

These cases became impossible in 2011. And from 2013, the 2.5% trend (sometimes 2.28%, sometimes just 2%) set in.

“It has been the case for eight years now,” McManus said. “Eight straight years of very low wage growth.”

Not caused by COVID

The COVID-19 pandemic has not caused wages stagnation, but it has intensified it. It has also expanded an already wide wealth gap. While working people in south-western Sydney and regional Wilcannia struggled with stubborn Delta outbreaks, an exclusive group grew richer.

“The wealth of Australia’s billionaires doubled during the pandemic, and corporate profits rose 10 percent despite the recession and mass unemployment,” McManus said. World stock markets, including Australia’s, hit record highs. Some businesses kept JobKeeper subsidies intended to support employees, despite recording rising profits.

“We will never see stronger proof that wealth does not trickle down,” McManus said. “In Australia, for the last generation, wealth has been trickling up. And during the pandemic, that trickle up became a torrent.”

For those who may feel guilty about pay rises in a pandemic, McManus crunched some pre-COVID numbers – specifically, the labour share of gross domestic product (GDP). Economists calculate the cost of labour, including superannuation contributions, as a percentage of GDP.

In 2019, labour costs fell to a record low of 47 percent of Australia’s GDP. The peak was in 1975, when labour costs were 57.4 percent.

Here’s what it translates to. “That loss of 10.4 percent of GDP is worth $208 billion in today’s terms,” McManus said. “That works out to a stunning average of almost $20,000 in lost income for each and every waged worker in Australia.”

Done deliberately

McManus calls for all of us to face up to the simple truth. “The wage crisis for workers, the destruction of the fair go, the creation of a working underclass, the betrayal of the great Australian bargain, is the deliberate outcome of conscious policy,” she said. “It was caused by policies designed to weaken the bargaining power of workers.”

Australia’s bargaining system has become unfair through years of restrictive legislation and employers winning legal precedents, including the Aurizon decision in 2015 that enabled the employer to cancel enterprise agreements when the bargaining got tough.

“It is like being tied to a chair and asked to stand up,” McManus said. “We can only take lawful industrial action in a very, very narrow timeframe, according to complicated laws, with motions and votes rubber stamped. It’s like you’ve got to wait until Venus is in this part of the sky and the moon’s rising at exactly this point, then you can do it.”

Stanford, a Canadian, agrees. “In the years I lived in Australia, it was a galling experience for me to learn about all the hoops you have to jump through and all the hurdles you have to overcome and all the incredibly micro-managing details in the Fair Work Act and all the other legislation and regulations governing unions, to do things that unions in other countries just do as a matter of course.”

The irony is that when working people have the right to strike, they use it relatively rarely. But when employers know staff can withdraw their labour, they are strongly inclined to bargain reasonably.

“We have low wage growth because we have policies that deliberately suppress it,” McManus said.

Rebalance required

“With all the power in the hands of employers, wages no longer move in a way that fairly shares the gains of productivity, of profits, of our nation’s wealth,” McManus said. “Our collective bargaining system needs to be updated and rebalanced to give all workers the ability to access the system to deliver fair pay increases.”

Rising productivity resulting from skilled staff using new technology is unrewarded. “Australian workers produce more with each hour of their labour than at any time in history,” McManus said. “But their compensation has not remotely kept up with their productivity.”

Teachers and support staff, with their ever-increasing workloads, know this only too well.

But there are solutions. “We need options to bargain across sectors and industries,” McManus said. “Our award system needs to be adjusted so it operates as a proper industry floor that can be adjusted as wages in industries are adjusted.”

First to go should be the “permanent casual” fiction and unending fixed-term contracts. ‘Gig economy’ jobs need to come with rights such as sick leave, annual leave and superannuation; and labour-hire rorts need to be axed.

And the right to strike needs to be reinstated.

Perhaps keep all of this in mind when your enterprise agreement next expires.

Monica Crouch