Greg Jericho is a wages disaster

By Leith van Onselen

The Guardian’s Greg Jericho has penned another article lamenting that workers continue to miss out on sharing in Australia’s booming GDP growth:

The latest GDP figures show the continued poor return households are getting from a strong economy. While company profits soar, real household incomes continue to fall. As a result, we have reduced our savings to keep spending at a level that sees the economy running along stronger than it has for more than five years…

The reason is clear – wages and household incomes are not growing at a level that enables households to keep spending without eating into savings… the annual growth of average compensation per employee of 1.7% is woefully low… in real terms average compensation fell and remains below the level it was eight years ago…

Yes, the economy is growing well, but the income is flowing right now towards corporations…

Households will not be able to keep reducing the amount they save at the levels they have been for the past year. Household spending growth in the long term can only be sustained by real increases in household incomes – and we have not seen that for a very long time now.

Jericho makes some good points.

Australian workers’ real incomes have been falling despite solid labour productivity growth:

Whereas business profits has been booming:

This has driven Australian workers’ share of national income to near record lows:

Whereas per capita household disposable income has fallen to 2011 levels:

That said, Greg Jericho has once again refused to mention one of the reasons why business profits are booming at the same time as real wages are falling: mass immigration.

Clearly, when you funnel 200,000-plus extra workers into an already oversupplied labour market each year, then you will place downward pressure on wages, as well as boost business profits via extra consumption. This is why the business lobby loves the mass immigration model so much, since it gets to privatise the gains while socialising the costs on the broader community.

Former treasury secretary turned NAB chairman, Ken Henry, explained this model in a speech last year:

Research NAB carried out earlier in the year showed that among our customers there’s not wholesale support for a larger Australia. For many, the prospect of a higher Australian population means more stress in the ability to buy a house, to live where you want to live, to get to work with a reasonable commute time. And many in the community are also concerned about our ability, as a nation, to maintain norms of Australian social and economic inclusion, and to continue to provide access to high quality services in areas such as healthcare and education…

But what is the business perspective? The same NAB research showed that most of our business customers would strongly prefer a larger population, which supports better business growth.

Various Productivity Commission modelling has also shown that immigration lowers the wages of incumbent workers (see here). These results were confirmed recently by modelling from Victoria University (see here). Several notable Australian economists have noted similar.

It is basic economics that if you stem the flow of foreign workers, then workers’ bargaining power will increase. This was explained beautifully by The Australia Institute’s chief economist, Richard Denniss, last year when he noted that the very purpose of foreign worker visas is to “suppress wage growth by allowing employers to recruit from a global pool of labour to compete with Australian workers”.  That is, in a normal functioning labour market, “when demand for workers rises, employers would need to bid against each other for the available scarce talent”. But this mechanism has been bypassed by enabling employers to recruit labour globally. “It is only in recent years that the wage rises that accompany the normal functioning of the labour market have been rebranded as a ‘skills shortage'”.

Even left-leaning economist, Stephen Koukoulas, has noted similar recently on Twitter:

Sadly, Fake Left economic commentators like Greg Jericho cannot bring themselves to even acknowledge these basic facts when discussing wages, because to do so would somehow be ‘racist’:

Immigration – because there are many desperate to hate – must be treated with extreme care by politicians and journalists, and certainly with more care than Abbott seems capable. The inherently racist parties will seek to use any discussion and any seeming evidence of the negative impact of migrants as fuel to burn their fires of hate.

I say again: when will Greg Jericho stand up for ordinary Australian workers and lobby to lower Australia’s reckless ‘Big Australia’ immigration program, which is not only lowering workers’ wages, but also raising their cost of living via housing, as well as eroding their overall living standards and wrecking the natural environment?

[email protected]

Unconventional Economist

Comments

  1. That said, Greg Jericho has once again refused to mention one of the reasons why business profits are booming at the same time as real wages are falling: mass immigration.

    You mentioned immgration. RACIALIST!

    • Jumping jack flash

      Immigration is simply a means to an end. It isn’t the cause, it is a tool to facilitate the necessary wage theft.

      Wage theft is neccessary due to greed, debt repayment, funding high lifestyle expectations, and keeping up with costs of living (which, for the guardians of the costs of living, is a bit of a feedback loop!).

      • …..and that most of the ‘growth’ is in non-productive non-tradable sectors!!!

        It is a helluva complex issue that simpletons like Jericho cannot begin to grasp as he hurriedly writes trash that his readers will agree with.

  2. The long term effects of stagnate wages growth is catching up to many businesses, especially those that have long term, established workers. Many of them are just fed up and just don’t care about the company or their job and its really affecting their products and services. Many of them are wishing for a redundancy payment

  3. Please tell me you’re going to do a takedown of Elizabeth Farrelly’s latest piece of idiocy in the SMH today

  4. For me there’s a simpler way to look at these facts and it all starts with the realization that wages are no longer a path to wealth.
    Wealth can no longer result from accumulated “savings” because in this world of global fiat capital savings have no real value, so wages as a savings precursor have similarly diminished value.
    It’s a little like squeezing a balloon, if you structure the economy such that economic vectors other than “work for wages” dominate your wealth accumulation processes than it follows that wages as such will become less and less important because wages represent a smaller and less important section of the economy.

    • If you use your wages to buy hard assets it can work out. Give me $500k/year and in ten years I’ll have some hard assets that I’ll put to work. Better than 60k/y say.

      BTW Jericho IMO does not believe what he writes, and does so to keep that leftie job. How long would he last if posted logical and well researched posts…not long at the Guardian. Most of these guys live a different life than they talk about. I don’t know many, but the ones I know, like the Greens, is very much do what I say, not as I do. There’s a word starting with “h” which describes it.

  5. More proof of the adage:

    Lefties are economically illiterate, because, if they were economically literate they wouldn’t be Lefties 😉

    • Thanks for paying to be a member of this left-wing or not-right-wing website!

      The right wingers in Federal Parliament have really got the budget deficit to shrink! Not.

  6. Jumping jack flash

    When electricity company execs can get 50% wage increases, that seems to me that Australians are benefitting from high business profitability and productivity.

    Its just that instead of millions of Australians benefitting, its a couple of hundred.
    But beccause of the magic of statistics, it shows wages growth, subdued, but still growing.

    Why is wages growth low?
    Immigration. Yes, immigration.

    But why immigration?
    To facilitate wage theft.

    Why is wage theft even necessary?
    Because of the debt that everyone has. The more income, generally, the more debt. And they who have access to the pot of wage inflation capacity first, get the lion’s share. Which just so happens to be all of it.