Sally McManus has no idea how to lift wages

Via The Guardian:

Only one in five Australian workers say they had a pay rise in the past year that covered increases in the cost of living with almost half reporting no rise at all, according to a new ReachTel poll.

The poll, commissioned by the Australian Council of Trade Unions, suggests that the majority of voters have noticed record-low wage growth and rate it a significant political issue.

Labor is gearing up to make sluggish wage growth a key election issue, signalling it wants to change the way the minimum wage is set and prevent labour hire being used to undercut the pay of permanent employees.

The poll of 2,453 people on 2 August first asked voters if they were in paid employment and, if yes, had they received a pay rise that was large enough to cover increases in the cost of living in the past 12 months.

Almost half (47.6%) said they had “no pay rise at all”, a further 32.9% said they had “a pay rise but not enough to cover my cost of living, and 19.5% said they had “a pay rise that covered my costs of living”.

When asked how significant low wage growth was to how they would vote 28.2% said it was “the top issue”, 54% said it was “important but not the top issue”, while 17.9% said it was not important. However, no other single issue was polled for comparison.

The poll found Labor leading the Coalition 51% to 49% in two-party preferred terms.

Wages in Australia have stagnated. Figures released in August show that in the past year wages grew by a record low of 1.9%. The latest ABS figures showed the cost of living for working households increased by 2.3% in the year ending June 2018.

The ACTU secretary, Sally McManus, said “Australians need a pay rise”.

“Working people and their families are struggling to keep their heads above water,” she said. “The cost of living is going up and people are struggling.”

“We need to change the rules so that fair pay rises can meet the rising cost of living.”

The ACTU has called for an end to the system of enterprise bargaining that allows strike action only for pay increases at the workplace level in favour of a mix of options including industry-wide pay deals.

This makes good sense at the microeconomic level. The pendulum has swung too far from labour in industrial relations. Where it fails is at the macro level. ACTU solutions won’t work in today’s macroeconomic circumstances of excess supply. The Australian output gap is huge. Indeed it remains thoroughly recessionary:

This is because the structure of the economy is exhausted thanks to:

  • deteriorating demographics;
  • peak household debt;
  • hollowing out of non-mining tradables, and
  • the ongoing post-mining boom crash plus the narrowing of national income drivers to a few large miners

If unions manage to lift wages in these circumstances then it will directly result in falling profitability, job cuts and falling wages. Excess supply means business has no pricing power, either, hence our fantastically low inflation. Workers will be right back where they started with a bullet.

The answer is to reform economic structure to boost aggregate demand and profits. Stop trying to lift wages directly. Start doing everything in your power to lift competitiveness and productivity to take up the economic slack. Then wages will rise sustainably with a bit of union muscle.

There are millions of microeconomic policy levers to pull on this front. But if you don’t get the macro settings right it won’t matter. We desperately need to fix the real exchange rate to boost aggregate demand. To achieve that  we need a much lower currency. That can be achieved by loosening monetary policy if you feel confident that it won’t boost house prices again or by cutting immigration.  The latter is also adding to labour supply when we have too much of it already. Sure, it adds to demand as well but only via the dead horse of household debt, augmented now by unsustainable public debt, inflating things like land values and the currency, elevating the real exchange rate.

Sally McManus has no hope of lifting wages until she recognises the macro reality that she is in.

Comments

  1. LNP paranoia about the ‘control’ unions have over the ALP is 180 degrees out of whack with the real problem, which is how much control the ALP (neoliberal right faction, virtue-signalling useful idiot left faction) has over the union movement. It will not be allowed to act in its own best interest, or the interest of working people.

  2. She’s the epitome of 30 years of identity politics: a sad sack of hollowness and a sound-board of prefabricated, easy-to-parrot 3 second sentences.

    She doesn’t stand for anything because there’s nothing for her to stand up for.

  3. Once you’ve tied wages to the dog-box and infrastructure development game and mass immigration the ACTU is arguing for a greater share of the national funny business that is placing a downward pressure on wages and living standards to begin with. The only way out was innovation and new industries that took vision and massive investment in science, technology and education for domestic students. Australia has not had any of this for a good 20 years. Time for a pay rise? Too little and far too late.

  4. GunnamattaMEMBER

    There’s an even bigger Macro reality we have all lost sight of.

    Back in the day when idiots like me set about trying to tone down the influence of unions at a workplace level, the story was all about ‘efficiency’

    With greater efficiency, companies would be more competitive, public organisations would get better outcomes for the taxpayer dollars, both would be more inclined to invest in capacity, and more people would have meaningful jobs.

    The unions bought the idea of efficiency once upon a time when Hawke and Keating sold them the idea they could have workplaces full of competitive employees.  Hawke and Keating sold me too.  As I said I was an idiot. For a brief period they, me and Australia per se bought the idea of efficiency and competition. 

    But none of that happened – we gave up being competitive in March 1996.  What has happened since then is Australia has deindustrialised and de competed at the same time.  Australia doesn’t do anything which competes with anywhere anymore.  It loads boats full of rocks which Australia possesses in greater abundance, closer to the surface and a shorter transport distance from the major buying market than anywhere else, or it generates a surplus of agricultural output (in years when the rainfall comes up) and fills another batch of boats.  These employ maybe 3% of the population.  Throw in a few global tourism lures, which bring in foreigners for a visit (as opposed to bringing in foreigners as a loss leader to sell houses to them, or tourism revolving around locals going on holidays) and you might get to 5%

    All the rest is bullshit, economically speaking. Bullshit revolving around the redistribution function of the central government, taxing those moderately competitive parts of the economy to keep other parts afloat.  The retailers, the housing Ponzi, the education sector, much of the tourism, the press, the accountants, the doctors, lawyers, teachers, aged care facilities, infrastructure construction, the cafes, the massage joints, the peons recording your calls for coaching purposes, the lollipop ladies, the window washers, the lot. In every last case you can get someone to do exactly the same job cheaper and better. Offshore. And the cheaper and better phenomena is never more overt than when looking at the remuneration of executive levels of sheltered companies, executive public servants and public officials, and of course our globally most expensive politicians.

    Australian politicians, Australian companies, Global Capital controlling corporate assets in Australia, Australian unions, and the Australian people have all given up on the game of being efficient and being competitive enough to win a contract from somewhere else.  What they have replaced that with is harvesting the bounty.  They all live off the Ponzi, and the Ponzi lives off the redistribution, and the Ponzi dilutes the redistribution with every new bum on a seat, while smothering real investment (should any still exist) and Australia’s real competitive position, and Australia’s efficiency. 

    Australia no longer has a need to be efficient or competitive, or no longer feels it needs to be.  The game plan now, game plan B for sure doesn’t require it.  It is back to the cargo cult mindset Keating used to wax lyrical about.  Just pick up a new mouth to feed, or a new thing to offload of value and that does the trick.  Coles and Woolworths don’t compete and they don’t invest, and they don’t do anything economically productive, they just harvest the demand that is there, and the only competition they have in doing that is each other and Aldi or IGA.  Same for electricity retail, or mobile communications, or government provided infrastructure, or schools (private and public) – none of any ‘investment’ is intended to generate better economic competitiveness, it is all about harvesting whatever demand is there. All too often soft flabby demand which has been planted in a fecund sea of debt. All too obvious to anyone thinking about insane house prices, insane banking practices, insane energy policy, insane overcrowding, insane education costs, the margins of retailers, mobile providers, and the determination of capital to keep its hands on economic policy (with implied threat to trash the lives of Australians unless it gets its way).

    The unions have lost sight largely because their own side of politics (the ALP) agreed with the Torynuffs back in the Howard era that giving up on competition was the way to go, and placing Australia in an economic palliative care ward (of debt, population ponzi & unseen Free Trade Agreements) was the best available alternative, while stripping the economy of fixed concentrations of capital (large industrial plant mainly) which unions had clustered around, as a by-product of their ideological obsession with de unionising Australia.

    From here the Unions alone will not be a hope in hell of stimulating stronger wage growth in any meaningful sense, because to do that they would need to take up the cudgels that the nation per se has let go of for a generation – doing things efficiently and being competitive.  Even if the unions were to try and pick up that baton they would be laughed at by capital – which for a generation has viewed Australia as the ultimate foie gras economy, force fed by debt – which has ploughed untold billions into housing debt and land debt and the trashing of energy policy which has destroyed Australian competitiveness.

    And the only way out of the national economic palliative care ward we have placed ourselves in is taxing inefficient capital until it becomes competitive, telling Australians they are about to embark on a generations worth of economic pain, and taxing wealthier Australians into the bargain while removing a load of concessions – all without a population Ponzi to prop up demand.

    Australia made this bed of nails.  Australia is going to have a Bex and a good lie down in it too

    • DarkMatterMEMBER

      Yes, indeed. Another way to put this is that the art of “Big Picture Thinking” has almost completely been eradicated in our society. We don’t get deep and meaningful examination of any of these important issues, instead we get superficial obvious knee jerks – which inevitably lead to the wrong conclusion.

      Like Sally McManus – just give everyone a pay rise. Similar deal with the pop ponzi – we are building vast numbers of hi rise single person dogboxes, and nobody asks what this means a “family” will look like in 20-30 years. It seems like there has been a deliberate policy of training people NOT to look at the big picture.

    • the truth doesn’t hurt…until it does.

      That moment is fast approaching – flat wages, sinking house prices, rising interest rates and a global shock will be our perfect Cat 5 economic storm

    • Good analysis. Keating spoke of the ‘old’ and ‘new’ economy where service industries were to replace Australia making things. In the process we didn’t rise to the challenge of imagining the new industries built on new intellectual capital because we don’t truly believe we are capable of it – and competing.

      This is what holds us back more than anything. As you say we just ‘harvest demand’ – in other words, follow, using a process of economic managerialism. The real-estate and population ponzi is a key symptom of this pathology, manipulating demand and calling it ‘the economy’.

      A hidden cost is that our ‘can-do’ and resilient edge has been eroded by the cultural change that followed. As we have been busy cramming people into boxes and narrowing their vision of the possibilities the the future might offer (enhancing their anxiety to service debt), we’ve killed a key advantage – that we were once a very different society with time and space to imagine. Our cities have become innovation death traps as the the type of economics we have embraced rewards the luddite and penalises the creative.

      If you want to see a presentation that defines how hollow Australia’s edge has become, watch the Qantas safety video at the start of a flight. The cringe of hearing how the Aussie culture is so unique and risk-taking must be reconciled with sitting on what has become a budget-style airline that now asks people to pay to sit in the emergency exit seats – and wants you to bid for an upgrade. Rather than having something to be proud of you are instead asked to enter a delusion that everything is just Jim Dandy.

    • davidjwalshMEMBER

      good one Gunna ……….. I’ve had the view for quite some time that my age is sort of in my favour now ………. getting old enough to be able to say that that bed of nails we all have to lie on will only really be biting when I’ve done my dash ……. or at least I’ll be able to insulate myself with sufficient ‘bex’ to not worry about the early twinges

    • ErmingtonPlumbing

      Speaking of Bex powders,…I was listening to a guy ranting on about the US health system in my local beatnik ermo coffee shop the other day.
      He was saying that because so many Americans can not afford health cover,…when people get chronically ill over there, say with cancer or whatever and cant afford treatment or hospital stays, the accepted procedure of dealing with them is to just prescribe large amounts of opioids and send them home to die.
      Not just for the pain and depression management of the chronic illness,…but to also allow for easy self euthanasia!
      This is the primary cause, he went on, for Americas Opioid crisis.
      Fking disgraceful if true.

      2.10 mins in Norman pulls out the bex powders for sally struthers
      https://youtu.be/cW2kSkurQFs

      And for cheech and Chong @ 54secs in
      https://youtu.be/A2lkhueyTBA

  5. Would there by anything wrong with raising the minimum wage in the ACT to A$30/hour?

    In San Francisco, it is A$20.44/hour.

    USA sets the minimum wage on a city by city basis and that makes sense – why should the min wage in postcode 2000 be as low as it is in rural Tasmania?

    Nothing gets made in the ACT anyway.

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