Wowser nation can forget pay rises

There’s good chance that the long awaited wages boom is over before it even started. The Botox Boom of infrastructure and dwelling construction is peaking plus and house price and consumption sectors are being shocked a credit crunch as I write. Add in that China is slowing and bulk commodities are headed for deep corrections in H2 and wages are going to resume falling before long.

How did it come to this?

Despite the rhetoric of it all being a “mystery” it is anything but. We’ve had huge jobs growth as the Botox Boom and NDIS rolled out:

Firms still need labour:

Yet wages growth tumbled across the entire period.

You can blame all of the usual micro-economic forces: weaker union power, gig economy, automation, corporate power etc. They have all played a role at the margin. But the key factor is macro and much more simple. We’ve been running a massive supply shock into an over-supplied labour market via mass immigration and visa fraud, also from UBS a few months ago:

It’s an inflow of workers way beyond anything we saw during the mining boom even though the only economic activity we have is building houses and roads for the same influx of people. Sound a bit circular?

Basically, we made a crucial macro-economic management error after the mining boom by aiming to pump up domestic demand by importing people. We should instead have left them where they were and focused on improving our competitiveness so that we could sell them our goods. The result is the entire post-mining boom adjustment has been dropped on wages.

There is no fix for this beyond cutting back the people flood. The Coalition has no will for it given its corporate mates love it. Labor is completely kidding itself that it will be able to police it. Other political parties are just wowsers, oddly led by the Left.

So long as we refuse to discuss the role of immigration in the labour market there will no pay rises. Indeed, if nothing changes, more falls are coming.

Comments

  1. The botox and synthol boom:

    http://i2.mirror.co.uk/incoming/article8974506.ece/ALTERNATES/s615b/Valdir-injects-synthol-into-his-bicep.jpg

    “firms reporting a labour availability constraint”? How do we know they are not lying? If that was true, the local Leader newspaper would have at least 1 page of job ads rather than a quarter of a page.

    In 2008, a job ad would say “work as a bus driver and get paid $60k/year with overtime”. There was nothing wrong with the Australia of 2008 and if wages were “too high”, why not import staff from NZ via the open border? That would push up wages in NZ as well and not make AUS “less competitive” than NZ.

    • St JacquesMEMBER

      Better to ask how we know businesses ARE lying about labour constraints. Easy, if there had been real labour constraints the last four years, then wages would be booming.

      • Bingo. Corporate profits are up 27% and wages are “up” 4%. Then right wingers say, “how will a UBI greater than $9500/year be funded”.

  2. Terror Australis

    Again with the “wowser” headline?
    Still haven’t bothered to look up what the word actually means, have you. 🤔

    Lazy blogging.

    • Wowser: “An excessively puritanical person”.
      Puritanical: “Practising or affecting strict moral behaviour”.

      How is the description “wowser” in the headline inconsistent with the commentary?

      • Because traditionally the term wowser is connected to cultural aspects of Australia, like art, books, television, dress codes, etc.

        So when people read wowser they usually think they are about to read a piece on the latest flesh flick on SBS being censored.

      • TailorTrashMEMBER

        Given I have had a very sheltered life I find MB frequently driving me to “urban dictionary” for translations of the Strayan vernacular.

        “In Australia, it is a derogatory word denoting a person who saps all the fun out of any given situation. Derived from the temperance movement in Australia and New Zealand at the turn of the C20th, when it was hurled as an accusation towards conservative teetotallers who were too prim and proper to relax and socialise, it has become a more generic term that can be assigned to any straight bore lacking a sense of humour, especially petty bureaucrats and Aussies politicians.”

      • We are wowsers because we refuse to discuss any possible downsides to immigration (that would be ray-cyst!) even when puzzling over persistent low wages. Seems fair to me.

  3. The number of empty shops on Chapel Street, once Melbourne’s premier shopping destination, has surged, new figures show, as tenants battle landlords, the impact of online retailing and the exodus of overseas and local brands from retail strips to the CBD and mega malls. Chapel Street running through the suburbs of South Yarra, Prahran and Windsor is now lined with “For Lease” signs stuck on shop windows, where interiors have been abandoned leaving unopened mail scattered on the floor and empty shelves and clothing racks. “People are just not spending”. …in-store sales were down about 60 per cent on a year ago.

    (AFR)

    • ah, thats nuthin, that is only a street
      we have a whole shopping centre up here, Broadbeach.Pacific Fair.
      old time punters say its the worst they have seen in 40 years
      for most of the others it is their first (and last) time around.

    • Super Phoenix

      Since Strayans have long lost export competitiveness, the only source of pay rises has come from the expansion of domestic markets – aka population Ponzi.

      Now that that route is being closed it is time to face the reality.

    • Was running the ruler over a bus opportunity mid last year 17, these are the rental nos
      Pitt Street Sydney, the average rent, m2 pa: about $12,000
      Bourke Street is $6600
      Brisbane’s Queen Street Mall is $4,050

      Say the average shop is from 80m2, thus
      Sydney annual rent is $960,000 almost 20,000 pw say $3000 day
      Melb $600,000 12,000 pw say $1500 day
      Bris $350,000 7,000pw say $1000 day

      WW, this joint is headed for a fall the biggest since strayan records were kept

    • Barry McKenzie

      Real wages are stuck in the doughnut zone?

      Let them eat bagels… once they get a better job.

      • Donut and coffee carrier at Reusa’s relations parties: you do not get a platter to carry around, so at most you can carry is 4 coffees (2/hand) and *some* donuts (number may vary depending on one’s length of ‘membrum virile’)… Presumably – the bigger the donut carrying capacity is, the more one is likely to obtain employment with Reusa.

  4. BabundaMEMBER

    The biggest contributor to this mess over the long run has been the restructuring of the economy to the ‘services’ sector, which has offshored well-paying jobs in tradables. For mine, one of your sharpest insights has been that mass immigration has contributed directly to this process in recent years. Instead of offshoring we now keep the jobs here and onshore the cheap labour. Genius really.

  5. Wage crash in the last 2.5 years:

    When he started working as a food delivery rider two and a half years ago, Matthew was paid $14 per hour and $5 per delivery on a standard contract. Those were “the golden days”.
    Now riders get as little as $7 a delivery and $0 per hour. And some can be waiting up to two hours between delivery jobs.

    https://www.theage.com.au/business/workplace/poverty-pay-food-delivery-riders-fight-for-right-to-minimum-wage-20180516-p4zfld.html

    $0/hour is fine – it is the per delivery rate that needs to be upped to $10/delivery. Especially if the eater is in a flat that has no lift.

    And ban foreigners from delivering food here.

    • ‘$0 an hour is fine’ – great! Where do I sign up? Will I need a resume? Is there training involved?

      Seems a sensible solution to low wage growth.

      • There is no training. And no safety equipment either – all these guys ride in skate shoes, without gloves, helmet unfastened.

        Luckily if they get killed or injured in a bingle, we import some more.

        Medicare can take care of the broken ones. Or NDIS, whatever. Privatise the gains. Socialise the losses.

      • Peachy loads of Indian blokes riding mopeds for Dominos in my area, often headlight is so dim they are hard to see at night (insert racist joke here). I have almost not seen a couple when driving at night and I think geez, these blokes must get themselves into trouble (never wearing reflective gear etc..) and their lights are abysmal.

    • TailorTrashMEMBER

      Obviously we are not doing this food delivery thing right. We have a skill shortage here . Suggest we import some (more ) people with experience from Mumbai and set up a proper dabawalla system . It will be great for jobs n growth, add to cultural enrichment ,and further advance our great global city towards its true destiny .

  6. So, wages are coming down, we all know that.
    Where is the bottom???????
    to be comparable wiht the USA down by half
    comparable with china indonesia down by 2/3
    Wage earners are headed over the fiscal cliff in droves
    er, there is no antidote nor remedy
    HUGE

    • Super Phoenix

      We wanna MOARR pay rises cause we DESERVE them.

      We deserve them cause we said so!!!

      • boomengineeringMEMBER

        12 o’clock, but the ramifications are yet to be seen by the masses and they have no clock to see.

      • Peach/Stag
        Re QE Do you reckon the RBA might be looking at Argentina and Venezuela and think ‘we better not go near that’ or will they just charge on with the Pitchford thesis generated BS?
        I’d think Phil might be keeping a nervous eye across the lake – but I’ve overestimated the tendency to do the right thing before.

      • Jumping jack flash

        Flawse, they will follow the “world’s best practice” produced by the US, and QE is the next step in the instruction book for “How to create infinite debt instead of doing anything”.

        Hopefully they find a braincell or two to rub together somewhere in the halls of the RBA before they do it so they can realise that we aren’t actually the US.

    • Will be interesting to see what happens when the next election is announced. That always has an interesting affect on various markets.

      • What sort of effect, generally? Depends upon the polling I guess – election called with Libs ahead means ASX up?

  7. St JacquesMEMBER

    So as the mining boom sets on the horizon 30 years before it was supposed to, the Ponzi is exposed for what it is, an unsustainable mess in the making.

    Don’t cry for me Argentina, we’re on our way, we’ll be together again.

  8. It wouldn’t be so infuriating if the cost of living wasn’t rising as the wages were stagnant. Accommodation, utilities and food are all going up. We haven’t just paused, we have hit rewind.

    • boomengineeringMEMBER

      That was the very argument against the speculators, when they thought they could just ride it out. Who can pay the rent with no job and cost of living rising. Even cramming immigrants into shoe-boxes won’t solve their problems just cause more.

    • St JacquesMEMBER

      but, but, but this rent-seeking is the whole point of the ponzi. Why else would investors invest in Straya?

    • Ronin8317MEMBER

      Cost of ultra HD flat screen TV and the latest smart phone went down, so to the RBA it is all good. If people are feeling pinched it is their own fault for eating rather than play games on the latest iPhone. :-p

  9. michael francis

    I wonder how many new arrivals will return to their country of origin once recession hits.

    • haroldusMEMBER

      Probably roughly equivalent to the numbers who don’t get dole/pension/medicare

      • The government should introduce a recession levy. This will be directed to subsidising rents so that more can be spent in the economy. For negatively geared properties the tax rebate will be 200%.

      • +1, if my Irish experience says anything a lot of them did go home. And good riddance with that.. 🙂

  10. SweeperMEMBER

    Could just be that gen y doesn’t believe in unions because there not cool. Seems more plausible to me.

    • You don’t make friends with salad.
      You also don’t get Union members with casual/temp/gig employees.

  11. Wrt pay raises, there’s a silly question that I just can’t get out of my head:
    Do farmers also get pay raises?
    If not than why not? Over the last 30 years they certainly haven’t benefited anywhere near as much as city folk, and in general rural and regional workers get paid much less than their cousins in the city, so can they also get some hefty pay raises?
    If farmers can’t get pay raises, because well their pay is more or less set by the global price paid for their product (as in not within our control) than how exactly can the rest of us get pay raises?
    This stupidity only makes the slightest sense if the AUD is allowed to fall like a brick, so pay raises all around and a $0.25 AUD exchange rate….yeah that makes perfect sense…perfect nonsense that is.

    IMHO Australia’s biggest problem is that all value is stripped from the country by the cities (yesterday you-all pondered the question, should migrants be forced to live out in the boonies? For me the question was to stupid to even address because if value existed (in the boonies) than migrants would flood there. It’s the absence of peripheral value that forces the migrants hand and centralizes the Aussie economy.
    Unfortunately this peripheral value will never develop if we Australians always look to our politicians for answers, this action in and of itself creates centralized policy and along with it centralized value.

    • fisho
      You are absolutely spot on!!! The currency has been over-valued for about 60 continuous years. What would we reckon the extent of that would be just now? As you elect maybe the real value of the currency is now USD0.35? That essentially means that the farmers are stripped of 50% of their GROSS income (Not net after expenses – GROSS) as a tax to support the cities in the manner to which they have become accustomed.
      Like you I didn’t bother commenting yesterday – the answer was so damned obvious!

      • Mining exports are responsible for a good part of that. Bob Gregory sorted the theory out years ago. Solutions are administratively easy but, apparently, politically impossible until the voting population accepts this.

        RRT.

        I would have thought that primary producers should be the greatest advocates e.g. Barnaby cuddling up to Gina instead of looking after the interests of his own constituency. Apparently not.

    • Jumping jack flash

      Farmers would get pay rises if they jumped on the cheap-imported-labour gravy-train, cut their wage costs, increased their productivity as a result, and paid themselves more.

      (Assuming that if you don’t employ at least a couple of people on your farm then you’re not an actual farmer, and excluding backpackers who are already cheap)

      • Silly comment, see Flawse’s reply…the real problem is that their gross revenue is halved.
        Halving their wage bill delivers no where near as much benefit as doubling their gross revenue. I guess if their land has zero operational value than the two equations might be similar …but even than …as I said silly comment!

    • A lot of farming has been automated now with machines and software, what took 200 people to run a farm now requires about 20. I suspect a lot of the pay rise (or lacking of) is due to efficiency gains.

  12. One of the most destructive manifestations of the artificially inflated labour supply has been the wholesale decimation of employment for the mature .
    Wholesale in the sense that a 22 year HR drone will not even consider anyone over 45. The usual feeble overqualified or not tech savvy excuses are made. Our society celebrates the vibrancy of vibrancy and discards the lessons of history and hard won life experience. The two major parties knowingly encourage employers to discriminate against our fathers and mothers, our friends and family by running an immoral and illogical immigration regime hell bent on destroying the host.

    As we speak , A whole cohort of our citizenry is discarded on the scrap heap , victims who remain silent, ashamed of their obsolescence. Who will speak up for these dispossessed? Is anyone listening?

    • Short answer NO
      Does anyone care NO
      as an x serviceman I can speak for us and vets.
      Most punters dont give a rats arse, we have learned to live with that.
      now its your turn.

    • I’ll have to admit that I really don’t understand what you’re complaining about.
      From my perspective: If you have experience, knowledge, contacts, skills…than what stops you from directly turning these positive attributes into cash-flow, get good at whatever and this nice little earner becomes a business. Next thing you know it’s you that is making the decision about who you want to employ.
      The point of “getting a job” when you are young is to continue the learning process, to become proficient and capable of being your own master. However for an old fella to want a young fellas “job” than there must be something wrong with this old fella, or he simply wants to live a really easy life, while someone else does the hard yards…either way it doesn’t paint a particularly rosy picture of the old fella.
      Maybe this is all that these HR morons see and if that’s what they see than who can blame them for not offering you a job?

      • When you get to be 60 you are a bit less inclined to mortgage your house to take the risk of starting a business.

      • drsmithyMEMBER

        From my perspective: If you have experience, knowledge, contacts, skills…than what stops you from directly turning these positive attributes into cash-flow, get good at whatever and this nice little earner becomes a business.

        Because the vast majority of people don’t have the skills, knowledge, ability, capital or interest in running their own business.

        And just because those people are completely OK with working for someone else, and consequently don’t measure up to the Libertarian Ubermensch ideal, doesn’t mean they don’t deserve a decent job and income producing the actual output for the person doing the “hard yards”.

      • Because the vast majority of people don’t have the skills, knowledge, ability, capital or interest in running their own business.

        Than you get a job, any job, but you don’t bitch about the lack of opportunity, (good jobs with good pay and ongoing prospects) when this is evidently not what you want anyway.
        As for having no interest in running their own business, So you want someone else to take all the business initiative, supply all the skill and all the capital, accept all the risks, so that you can have a “decent job” …yeah good luck with that approach, I get the feeling you’ll be waiting a while for the call back on that gig.

        As for ” Libertarian Ubermensch ideal” just wtf does this have to do with the way we socially organize and reward ourselves (aka create jobs)…the whole Libertarian ideal is fundamentally flawed because its core belief is that an efficient economy will create maximum value for all participants, you don’t need to think all that long or all that hard to discover that the benefits of economic efficiency are primarily transient and within a few years become fully priced into the economy through the various processes of rent seeking. However, none of the above suggests that we won’t continue to find ways to employ each other because in the first instant as humans we’re creating a social structure…IMHO businesses are primarily a social structure those that survive long term have the added advantage of generating positive cash flow.

        BTW I replied to your critique of my Microsoft rant on the weekend…I’ll see if I can find the spot… but it is MS using my mobile upload data to share the updates already on my computer with other MS users (as in update their PC’s just like a peer to peer file sharing system) that I object to. in my opinion If they want to do this they need explicit permission from the user.

      • When you get to be 60 you are a bit less inclined to mortgage your house to take the risk of starting a business
        Is it really necessary to mortgage your house to create a viable business?
        I can think of several things that I would do if I had time on my hands and didn’t want to risk huge amounts of capital. The most important aspects of any business are growth opportunities and positive cash flow…you don’t typically arrive at positive cash flow by pursuing opportunities that require capital injection just to support them (i.e. re-mortgaging the house) these “opportunities typically have negative cash flow to begin with and they don’t get any better if you try to scale them up …just look at all the Franchise stupidity…people “investing” in businesses with negative cash flow and wondering why they’re going broke…like huh!

      • Seems to me fisho, that you’re missing the point which was the fact that whilst they’re trying to “get a job/whatever job”, they are discarded from the potential candidates because of who they are. Still, you went full circle and said “get a job”.

        In the old country we had a saying which kind of translates to “he who has their belly full does not believe the hungry”

      • @Ino, so you’re suggesting that there is absolutely nothing that old fellas can do that is of value?
        If so than it is obvious why they can’t get a job.
        zero employment value = zero job opportunities
        simple equation really!
        Still I have trouble believing that someone who has lived to be 60 years of age hasn’t learned a thing or two about life and figured out a couple of ways to make a buck or two…In the end that’s the job they get.
        As an example both NDIS and Aged Care reforms are creating huge opportunities for simple service businesses that support the needs of the Disabled and Elderly. In general the very Elderly are far more comfortable with a 60 year old driving them around and helping than they are with a 20 year old rushing to get the “job done” the job is as much about the time spent with these people as it is the task that’s undertaken. There are huge growth opportunities in the aged care sector especially wrt supporting elderly in the homes…huge opportunities that are ideally suited to the old but not so old.

      • drsmithyMEMBER

        Than you get a job, any job, […]

        They can’t. That’s the point the original poster is “complaining about” you’re trying to refute with ‘start your own business’.

        […] but you don’t bitch about the lack of opportunity, (good jobs with good pay and ongoing prospects) when this is evidently not what you want anyway.

        Oh, fuck off. See point above vis-a-vis running your own business. Just because someone can’t or doesn’t want to start their own business, doesn’t mean they don’t have ambition or cannot create great things and consequently deserve nothing more than the dregs.

        As for having no interest in running their own business, So you want someone else to take all the business initiative, supply all the skill and all the capital, accept all the risks, so that you can have a “decent job” …yeah good luck with that approach, I get the feeling you’ll be waiting a while for the call back on that gig.

        Uh huh. Meanwhile, working for someone else is not only how most people in the world live, it is a core construct of society.

        Supply all the skill and capital ? If the heroic entrepreneurs have all the skill and capital, why do they need to employ others ? Why do they need investors ?

        Anyone who doubts the importance and value of workers needs to consider which would be more fatal to a business – the top leadership vs everyone else disappearing in a puff of smoke.

        It’s great you’re so full of ideas you can’t even investigate them all – it’d be even better if you shared them so some of the squillions of un- and under-employed people in this country could – but not everyone is in your position, and they (and their families) don’t deserve to be thrown on the societal scrapheap because of that.

      • @drsmithy, no disrespect intended but I suspect we are both far to entrenched in the rather unique environment that created a 20th workers paradise. I’d suggest you read some of what Stephen Morris has written wrt the evolution of work and the uniqueness of the 20th century as far as the work and social constructs that evolved during this period.
        Personally I don’t share his extreme pessimism because I can already see the whole “work” environment evolving to match the reality that we really don’t need that work be useful to find ways of rewarding the effort that goes into “work”
        https://www.macrobusiness.com.au/2018/05/links-12-13-may-2018/#comment-3103578

        If I had to guess I’d say that late 21st century employment will look much more like late 19th century employment (or maybe even 18th century) than it resembles 20th century work environment. If you remain married to the employment constructs of the 20th century than you’re bound to be a causality of this change, change will happen / must happen, in my mind the only question is do I benefit from, or am I a causality of this change.

      • mild colonialMEMBER

        I do have one idea for a very small business (that could nonetheless explode). Set up a stall at your local weekend market to answer people’s questions about how to use their phones and possibly laptops, maybe sell ten minutes of response time for $20. Like how to set your privacy settings, how to set up your slideshow, how to set your touch id. I need this business, desperately, and I think many many thousands of others do.
        Another business is to take old people for walks in safe places where they won’t be run over by bicycles.

      • jkambahMEMBER

        Fisho

        The issue in Oz is the competition from cheap imported labour, basically destroying most of the existing society. It is also highly corrupting and distorting to maintaining a properly functioning economic system in the long run. Young people can not get employment due to the competition and if they do its generally at a lower wage then it would have been. Progression is difficult and white males now face open discrimination due to the fact that many of the new arrivals choose employ their own kind when they are in a position to make an employment decision, plus there is are diversity (gender/race) employment program in place.

        Plus the education system in Oz has failed us. It is run for the benefit of the elites with social conditioning being a key driver rather than skill/knowledge transmission. Unless you know how to handle these issues you can easily become a victim.

        For the life of my I can not see any reason why migrants are being brought in to work in our retail sector, as so many obviously are when you visit the malls. These jobs were entry level jobs for our young (my first job in 1966 at $12/week was in retail) and for housewifes who were often happy to work part time. Of course there was also a lot of full time adults in that activity as well. No doubt some pensioners would be interested in working part time in the retail trade if they could find jobs.

        I am not complaining for myself since I am already retired and derive extra income by speculating in the sharemarket.

        You need to be a bit more honest and understanding about what is being done to todays average worker, who make up the majority of Australia’s employees. I am not talking about self starters that can establish their own businesses.

      • @jkambah geez mate cry me a river…or better still cry one for the farmers that earn most of their income in unprotected markets, markets that could care less what your social conditions, wages or retirements plans are.
        These sectors of the economy we DEEM fit to compete (or lets be honest we just say F-it that’s your problem Mr Farmer,) now just where are my benefits and why hasn’t the government done something to help poor little city based me…don’t they know how much it costs to live?

        There is no answer but to adapt to reality and what you are talking about is reality and it’s knocking on Australia’s door. BTW it’s just about done with knocking politely and is gunna put on bover-boot and kick the damn door in.
        That’s the reality that you want to delay, sure would be nice …but it ain’t going to happen. .

        You see the problem (from my perspective) is that Australia has already taken far too long to adapt and the reat of the world did a lot of adjusting post GFC soon it’ll be our turn and we won’t be helped by creating more structures that reward stupidity.
        For me the turning point will be when our farmers start buying a little place in the city to rest while they’re in town, rather than the current situation where good farms are being turned into speculative assets for a moneyed city folk or worse still sold to foreign miners by our very corrupt politicians (looking at you Obeid and co). seriously look at what is happening in the Bylong valley, the sort of stupidity that only a politician could love or some city dweller that’s more concerned with where their next latte will come from than where the milk to make it comes from.

      • drsmithyMEMBER

        I’d suggest you read some of what Stephen Morris has written wrt the evolution of work and the uniqueness of the 20th century as far as the work and social constructs that evolved during this period.

        I always make a point of reading his posts, carefully.

        I’m fairly sure his point, which is the same as my point, is that we don’t HAVE to revert back to some form of dystopian neo-feudalist type society, but so long as power continues to be removed from the common folks, that’s what’s going to happen.

  13. Jumping jack flash

    “We’ve been running a massive supply shock into an over-supplied labour market via mass immigration and visa fraud”

    “There is no fix for this beyond cutting back the people flood. The Coalition has no will for it given its corporate mates love it. Labor is completely kidding itself that it will be able to police it. Other political parties are just wowsers, oddly led by the Left.”

    Nailed it, and nobody wants to do anything about it because they’re all thinking about their life after politics.

    I suggest the only reason we haven’t had wages falling, and debt deflation, both showing up in the stats is because the imported workers work for cheap, the employers reap the benefits and pay themselves more.

    Check out executive wages over the same period. I’m sure they’re not stagnant!

    Fix the statistics, fix the country.

    We only need enough rises at the top end of town to counter the falls at the bottom, then the stats show all is good. Not great, but not bad either.