The Left not the Right has destroyed Aussie wages growth

Advertisement

A pointless wages debate today. First the Left, at The Guardian:

Despite chief executives having bumper pay increases last year, the majority of Australian workers have seen their wages decline.

Figures released on Wednesday show the real value of wages has stagnated across the economy, with inflation and wages now growing at the same annual pace of 2.1%.

…The data comes after a report found this month Australia’s CEOs are doing better than ever, with pay up 12.4% for those running ASX 100 companies, to the highest level ever.

A survey by the Australian Council of Superannuation Investors found the median realised pay (the amount received including equity that vested during the year) for executives rose to $4.36m in financial year 2017.

…“When the system is out of balance and big business has too much power, this is what happens,” McManus said on Wednesday. “Balance needs to be restored so working people can win the pay rises they deserve.”

Second, the Right, at the AFR:

Predictions that casualisation and the gig economy would lead to the demise of traditional employment have been greatly exaggerated, with most employers still preferring a permanent workforce, a new paper says.

Griffith University Professor and labour economist David Peetz, who was deputy head of the industrial relations department under the Keating government, argued platform technologies such as Uber may be the biggest challenge to the employment model but full-time employment was still increasing and self-employment was falling.

…Professor Peetz, who has previously been commissioned to do research for unions, acknowledged particular sectors, such as fast food, mining and cleaning, were minimising businesses’ responsibility for employees through the “fissured workplace” of franchising, labour hire, and contractors.

But he said most of these structures still relied on employment relationships and did not signal that capitalism would be overrun by a “horde of freelancers”.

Advertisement

Obviously remuneration is out of whack. Executive greed, power and concentration is one reason. So is increased casualisation and reduced union power. Though alone the pet reasons of both Left and Right are insufficient to explain today’s historically crushed wage outcomes.

There are many other reasons. One major driver is the falls in the term of trade. The recent rebound is not broad based enough to help most workers. Another is falling productivity though this is largely the fault of misallocated capital.

But the truth that neither side is willing to admit is that the breaking point came when casualisation and executive power combined with a ready supply of cheap foreign labour. That’s when a traditional struggle of relatively equal interests turned into a perpetual supply shock for only one side of the equation.

Advertisement

The Right is perfectly positioned to deny it. It feasts on growing demand by volume while plucking workers from anywhere. I’d like to argue that some spirit of noblesse oblige could prevent executives from ravaging their fellow Australians but that’s pretty naive. No such spirit exists in business today.

The problem lies with a spastic Left that has totally lost the plot by supporting open borders. No amount of seventies union activism will work when the labour market is a leaking sieve. 10,000 workers can strike tomorrow and be replaced by 20,000 half-priced Indian or Chinese scabs. Where’s the pricing power in that?

Yet the ACTU is one of the country’s most extreme open border nutters. From Sally McManus recently at The Monthly:

Advertisement

McManus was first drawn to left-wing activism at the age of 17 during a protest against mass teacher sackings by the Greiner Liberal state government in 1988.

“It was the feeling of power that I had, surrounded by all those people, that I’ve only found replicated in similar circumstances where there’s been big collective actions,” she says. “I didn’t put my finger on it until later, but that’s where it started.”

The daughter of a railway worker and a clerical staffer in a Parramatta pharmaceuticals factory, McManus is fiercely proud of her westie identity. The snobbery and discrimination she encountered in more well-heeled parts of town helped shape her understanding of the world as a place where money and power are life’s great determinants.

“When you were growing up and you managed to get to the beach, which would take two and a half hours on public transport, you’d get there and people would say, ‘Go home, westie.’ You’d hear the place where you grew up being run down, the usual stuff about uggs and flannelettes.”

Carlingford also gave her a firsthand look at suburban Australia’s slow and fitful evolution on racial issues. In the ’80s and early ’90s, the far-right National Action party was terrorising new Asian migrants in Sydney’s west and tapping into a deep uneasiness at the sudden influx of non-white faces.

“When I was growing up it was a very white place. In the last few years of school we had immigration from China and Korea, and all of a sudden these kids turned up who were older than us – they had to get their HSCs, but they were 19 or 20 – and I remember the racism. People graffitied ‘Asians Out’ on the Epping highway and on people’s garage doors. I’m sure I wasn’t perfect either, I was growing up in that environment. It was a reaction to change that was happening very quickly.”

That experience has informed McManus’ take on how unions should respond to the Islamophobic and anti-immigrant sentiments that have fuelled the resurgence of One Nation.

“Parts of Australia are doing it tough,” she says. “They’re doing casual work, their kids can’t get jobs, their services are crappy because they’ve been privatised, and there’s this resentment: ‘Why aren’t things the way they should be in Australia?’ Pauline Hanson is giving them false answers to that, but she’s providing an answer. Our role in dealing with that is doing our job – telling people the truth and actually having a program that’s going to make a difference in people’s lives.

“National Action and people like that had their vision of western Sydney, but that’s not how it’s ended up. Now it’s one of the most successful places in the world where people from many different cultures live together.”

No, it isn’t. It’s a special economic zone where coolies are exploited mercilessly. From the Fair Work Ombudsman, via Domainfax recently:

A concentration of underpaid workers has been uncovered in western Sydney, with almost two- thirds of businesses audited found to be seriously short-changing workers or failing to keep proper pay records.

The Fair Work Ombudsman investigation found that 64 per cent of almost 200 businesses audited were breaching workplace laws in suburbs including Cabramatta, Guildford, Mount Druitt, Fairfield and Merrylands.

Fair Work Ombudsman Natalie James said businesses that were underpaying workers and not issuing them with correct pay records were on notice that future breaches could result in serious enforcement action.

…The suburbs are also home to a higher than average proportion of migrants, with both Harris Park (85 per cent) and Parramatta (74 per cent) at more than twice the national average of 30.2 per cent.

…“When combined with a lack of familiarity with workplace laws, language barriers can present significant difficulties to employers seeking to understand and comply with their obligations.”

…She said new arrivals to Australia might have a limited awareness of Australian workplace laws.

Advertisement

Add Alan Fels’ new report this week:

Former consumer watchdog Allan Fels, who is leading the government’s Migrant Workers Taskforce, said he believed one-third of international students were being exploited, with an unpaid wages bill in the billions… [He estimated] up to 145,000 students on working visas are being underpaid by employers…

Professor Fels, who led the fight to recover $160 million for 4000 underpaid 7-Eleven franchise workers, said workplace ­exploitation of overseas students was “widespread and systematic”…

He said exploitation of inter­national students by businesses owned by migrants from the same ethnic group was a particular problem…

In fact add all of the following:

  • For years we have seen Dominos, Caltex, 7-Eleven, Woolworths and many other fast food franchises busted for rorting migrant labour.
  • The issue culminated in 2016 when the Senate Education and Employment References Committee released a scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documented systemic abuses of Australia’s temporary visa system for foreign workers.
  • Mid last year, ABC’s 7.30 Report ran a disturbing expose on the modern day slavery occurring across Australia.
  • Meanwhile, Fair Work Ombudsman (FWO), Natalie James, told Fairfax in August last year that people on visas continue to be exploited at an alarming rate, particularly those with limited English-language skills. It was also revealed that foreign workers are involved in more than three-quarters of legal cases initiated by the FWO against unscrupulous employers.
  • Then The ABC reported that Australia’s horticulture industry is at the centre of yet another migrant slave scandal, according to an Australian Parliamentary Inquiry into the issue.
  • The same Parliamentary Inquiry was told by an undercover Malaysian journalist that foreign workers in Victoria were “brainwashed” and trapped in debt to keep them on farms.
  • A recent UNSW Sydney and UTS survey painted the most damning picture of all, reporting that wages theft is endemic among international students, backpackers and other temporary migrants.
  • A few months ago, Fair Work warned that most of Western Sydney had become a virtual special economic zone in which two-thirds of businesses were underpaying workers, with the worst offenders being high-migrant areas.
  • Dr Bob Birrell from the Australian Population Research Institute latest report, based on 2016 Census data, revealed that most recently arrived skilled migrants (i.e. arrived between 2011 and 2016) cannot find professional jobs, with only 24% of skilled migrants from Non-English-Speaking-Countries (who comprise 84% of the total skilled migrant intake) employed as professionals as of 2016, compared with 50% of skilled migrants from Main English-Speaking-Countries and 58% of the same aged Australian-born graduates. These results accord with a recent survey from the Bankwest Curtin Economics Centre, which found that 53% of skilled migrants in Western Australia said they are working in lower skilled jobs than before they arrived, with underemployment also rife.
  • The Australian Bureau of Statistics (ABS) latest Characteristics of Recent Migrants reportrevealed that migrants have generally worse labour market outcomes than the Australian born population, with recent migrants and temporary residents having an unemployment rate of 7.4% versus 5.4% for the Australian born population, and lower labour force participation (69.8%) than the Australian born population (70.2%).
  • ABC Radio recently highlighted the absurdity of Australia’s ‘skilled’ migration program in which skilled migrants have grown increasingly frustrated at not being able to gain work in Australia despite leaving their homelands to fill so-called ‘skills shortages’. As a result, they are now demanding that taxpayers provide government-sponsored internships to help skilled migrants gain local experience, and a chance to work in their chosen field.
  • In early 2018 the senate launched the”The operation and effectiveness of the Franchising Code of Conduct” owing in part to systematic abuse of migrant labour.
  • Then there is new research from the University of Sydney documenting the complete corruption of the temporary visas system, and arguing that Australia running a “de-facto low-skilled immigration policy” (also discussed here at the ABC).
  • In late June the government released new laws to combat modern slavery which, bizarrely, imposed zero punishment for enslaving coolies.
  • Over the past few weeks we’ve witnessed widespread visa rorting across cafes and restaurants, including among high end establishments like the Rockpool Group.
  • Renowned racist Alan Fels unveiled huge wages fraud by migrants of foreign students across the major cities.

Labor and The Greens want even higher immigration. We know. MB has tried personally to talk them out of it!

Advertisement

The fact is the fundamental drivers of Aussie wages growth are weak today with too much supply and not enough demand shown up in a very large output gap. Adding a deluge of cheap foreign workers to this equation is completely bonkers if you represent labour:

The wowser Left has killed wages in Australia, not the greedy Right.

Advertisement
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.