Why mining hits income so hard

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From The Australian:

“If you lose a job in mining, or if someone in that space has to trade down to a lower-paid job, then that’s less income for the individual and less purchasing power,” senior ANZ economist Justin Fabo said.

“If that happens on a large scale it all adds up.”

Put simply, it’s not just about the percentage of the Australian workforce employed in the mining sector, it’s the size of their pay packets.

“We’re looking at some substantial job losses [in the mining sector]. Some of those people will leave the country or get jobs elsewhere, so it might not show up massively in the unemployment rate but in terms of a drag on income, we think that will be significant,” Mr Fabo said.

This graphic, Tweeted today by Mr Fabo, shows just how big the wages gap is in terms of full-time average earnings.

wages-mining-growth

Will wages in another sector step up now that mining investment is cooling off?

Historically, a lower Australian dollar would mean the local manufacturing sector would step into the spotlight, but according to Mr Fabo, the Aussie dollar has been too high for too long and most of the industry has fundamentally changed in that time to deal with it.

Yeh, manufacturing, good one!

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.