University of Sydney labour economist, John Buchanan, is the latest commentator to throw a wet blanket over the Federal Budget’s projected wages explosion:
From The AFR:
A leading labour relations expert says there is no end in sight for the low wage growth…
John Buchanan said he did not expect any significant change to the economy’s persistent 2 per cent pay increases, and argued low growth was the result of deeper changes to the workplace system.
“In the foreseeable future I can’t see any serious change here,” he said. “It’s kind of like climate change. Things slowly chip away and no one really notices. But ultimately when all the things come together, you start to see something really big”…
Professor Buchanan argued the low growth was the result of decades of structural changes to wage institutions “come home to roost”.
He said the move to enterprise bargaining in the 1990s had fundamentally changed a system “where the wages of the strong supported the weak”, including by fragmenting and “quarantining” wage rises that previously flowed more broadly between occupations through awards and pace-setting industries…
Professor Buchanan argued the labour market was now “starting to reach a critical point of institutional momentum”…
“As the economy becomes more fragile, these cracks start to become more visible. It will be particularly visible in the next downturn, that’s when you’ll really see it”…
Professor Buchanan said the institutional factors could not be easily addressed.
“Huge changes have been made to break down the dams, the canals and the pipes that control the labour market. The labour market’s not stock market and shares. It’s going to take a long time to change direction.”
To the institutional factors mentioned above by Professor Buchanan, you can add the systematic undermining of wages via Australia’s rorted visa system for foreign workers.
As noted frequently, there are now entire business lines, firms and sectors whose business models rely heavily on the availability of cheap foreign labour, or worse, running virtual slave labour.
We have seen this in fast food, convenience stores, agriculture, building, mining, accounting, IT, engineering, education, transport, the gig economy and no doubt it is even more widespread.
In short, there has been a broad confluence of factors that have driven Australia to the low wages growth position that it finds itself in today. And it these factors are unlikely to disappear in a hurry.
