Business Council of Australia president and chief engineer of Australia’s LNG calamity, Grant King, has been quick to douse RBA Governor Phil Lowe’s call for workers to demand pay rises. From The AFR:
Business would love to pay workers more but can only do so if productivity and profits improve, says Business Council of Australia president Grant King…
Unless the terms of trade rebounds sustainably – rather than only for one quarter – and productivity growth strengthens businesses should resist Dr Lowe’s belief that it would be a good thing when workers begin demanding higher wages.
Mr King acknowledged that record low, or even negative, real income growth was one of the key factors driving the resentment captured by populist movements such as Brexit, Trump and One Nation.
“But we don’t think the answer is to just say ‘pay people more money’… because we all know that the only thing that supports effectively income growth is the terms of trade or productivity growth.
“I think business would be delighted to see incomes grow, but only if the other mechanisms are in place.”
With respect, real pay has plummeted over the past five years despite solid improvements in labour productivity:
Meanwhile, the share of Total Factor Income going to workers has fallen to the lowest level in more than 50 years:
As Houses & Holes noted on Monday:
Australian workers are at the pointy end of a rampant class war that includes mass immigration, systematic visa rorting, hollowing out, wholesale support for property capital owners, de-unionisation, the rise of robots and media corruption…
Workers would get pay rises if they could but are being systematically stripped of pricing power by Phil Lowe & Co.
One only needs to look at Australia’s permanent migrant intake, which has been maintained at turbo-charged levels – even higher than during the mining boom:
Despite the labour market and economy having significant spare capacity:
As long as the labour market continues to be flooded with permanent migrants and temporary foreign workers there will continue to be an oversupply of labour, which will continue to reduce workers’ bargaining power and maintain downward pressure on wages.
In the meantime, housing affordability will remain under pressure, especially in the migrant hotspots of Sydney and Melbourne, thus eroding workers’ real purchasing power even further:
Clearly, the best way to boost workers’ bargaining power and raise living standards is to slash Australia’s mass immigration program and take pressure off jobs, housing, infrastructure, and the environment.
