Real wages are flying backwards on weak wages growth for workers

Workers’ real wages went backwards by a remarkable 2.7% in the year to March, after a dismally weak Wage Price Index result today for the March quarter: wages rose 0.7% in the quarter — the same as the December quarter — and 2.4% over the year, far short of the March quarter inflation result of 5.1%.

Public sector workers had it even worse. Their outcomes were 0.6% and 2.3%.

The result is dramatically weaker than even the Reserve Bank’s preferred inflation measures: trimmed mean inflation for March was 1.4% and the weighted median was 1%.

Some economists used to dismiss real wage concerns because growth was higher than those, usually lower, measures — even if you couldn’t go to the supermarket and ask for the trimmed mean price rather than the actual cost. But even that’s no longer available.

And once again the government and the RBA have been exposed for promising wages growth and being proved wrong. We’ve been here before, so many times, before the pandemic: workers told that their wages would start growing in the near future, only for yet another sub-3% number to result.

The RBA in its May meeting minutes yesterday noted:

Members observed that price pressures were intensifying and there was upward pressure on wages … That information received over the preceding month, particularly through the bank’s liaison program, had indicated that labour costs were rising at a faster pace and that this was likely to continue. Liaison indicated that many firms were having difficulty hiring workers with the right skills. Given the tight labour market and increase in job mobility, more firms were having to pay higher wages to attract and retain staff, and labour costs were picking up at a faster rate than over the preceding year.

Well, not so much: 0.7% growth in March was the same as in the December quarter.

It also places the spotlight firmly on the Morrison government and its media cheerleaders who think real wage cuts are a good idea. With wages having already gone backwards significantly in the year to March, how much more in real wages cuts does Morrison think we need? Three per cent? Five per cent?

And looking over the next few years at inflation and wage expectations, will Australian workers ever catch up with earlier real wage levels? Or will they be stuck at 2013 real wage levels into the late 2020s?

None of this is accidental — it’s not some piece of bad economic luck. It’s the result of a deliberate policy of wage suppression by the government and business. Morrison says he doesn’t control wages, business does — but the results demolish that argument. Public sector wages growth is lower than private sector growth as a deliberate policy by him and state governments.

Tomorrow sees the April jobs data — the final significant bit of data before Saturday’s poll. It is forecast to show a 20,000 gain in employment, with unemployment dipping slightly to 3.9%, the lowest since 1974. But that isn’t translating into wage rises.

It’s common to refer to increasing precarity of work as a key reason for wage stagnation, given the poorer bargaining power of gig economy workers. But there’s another reason in the changing Australian economy, too.

The pandemic forced businesses of all shapes, sizes and across the economy online, and that has triggered a boom in “fulfilment” — people in warehouses, distribution centres, supermarkets, shops of all kinds and in trucks, vans, cars.

Property companies and super funds have headed deep into logistic businesses. Companies such as GPT, Mirvac, Scentre and Goodman groups are all investing heavily in storage, distribution, home delivery and other ways of linking online sellers and companies to customers. Australia Post has also invested heavily in distribution systems.

This needs low-skilled, low-paid workers, not the high-skill jobs that we like to imagine the new digital economy might be creating. These jobs are in addition to the cleaners and process workers in these centres, and the aged care workers, the helpers in the health system, the hard workers on the front line of the caring economy that makes life easy for the middle class but has to make do with minimum wage.

These changes in employment will continue for decades. That much-promised wages growth could be a very long time coming.