Recent RBA rhetoric about the need for higher wages growth has been stark:
Wage and price pressures are subdued and are expected to remain so for some years. The economy is still operating with considerable spare capacity and the unemployment rate remains higher than it has been for some years. Further progress in reducing spare capacity is expected, but it will be some time before the labour market is tight enough to generate wage increases that are consistent with achieving the inflation target. In the central scenario, the unemployment rate will still be around 6 per cent at the end of this year and 5½ per cent at the end of 2022. In underlying terms, inflation is expected to be 1¼ per cent over 2021 and 1½ per cent over 2022. CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions.
But, as Alan Kolher noted this week, the RBA is now fighting directly against the Morrison Government:
Assistant Minister to the Prime Minister and Cabinet, Ben Morton, on November 13 announced that the existing 2 per cent cap on wage increases for public servants would be removed and that future increases would be limited to those in the private sector, as measured by the ABS’s wage price index (WPI).
It was presented as a way for public servants to get pay rises of more than 2 per cent. Morton said that would happen when “private sector wage growth … eventually exceeds 2 per cent”, which is probably why it didn’t get much attention at the time.
But right now, the WPI is just 1.4 per cent, so the new policy is a cut from the previous 2 per cent.
Kohler goes on to note that the Government’s other major initiative regarding wages today is its industrial relations omnibus bill which will:
- Enables employers to cut unions out of enterprise agreements.
- Such agreements nearly always lower wages.
- The Fair Work Act is the safety net against exploitative agreements but the bill includes a two-year exemption for the test rendering it useless.
And yesterday, as Leith notes, we got this from the AFR:
[Morrison] suggests that once migration resumes, it will be adjusted to meet the needs in areas of burgeoning demand such as nursing and aged care, where not enough local workers can be found.
“We must re-look at the role that temporary visa holders play in meeting our economy’s workforce requirements, where Australians do not fill these jobs”.
The truth is, the Morrison Government is violently opposed to wages growth. It operates on the most basic trickle-down thesis that all wage growth damages profits and jobs, and must be extinguished.
This is bad economics and terrible politics. Wage growth is essential to the development of a robust economy. As wages rise, businesses seek to expand margins via investment into new efficiencies. This might be automation, new processes, or any number of innovations. That delivers productivity growth which lifts income for both the business and its workers. Consumption rises. So on and so forth. If there are fewer jobs then those resources can go into other segments in need of labour.
The notion that immigration works just as well is empirically false. The kind of cheap, low-skilled migrants that the Morrison Government specialises in importing only deliver dis-productivity as ever more and cheaper slaves are used to do jobs we used to or could do more efficiently.
This may make the business owner richer but everyone else goes backward. And when I say everyone, I mean everyone. The worker, his neighbour, the entire community sees the capital base shallowed as it is crush-loaded and degraded.
In effect, it’s a kind of privatised profits, socialised losses economic model that favours mates and grows inequality.
But don’t just take my word for it. Ask the Godfather of Australian economics, and famous economic rationalist, Professor Ross Garnaut:
“The overall effect was to integrate much of the Australian labour market into a global labour market for the first time”…
“Integration into a global labour market held down wages and inflation during the resources boom, [but] it contributed to persistent unemployment, rising underemployment and stagnant real wages”…
“It contributed to the historic shift in the distribution of income from wages to profits. Increased immigration contributed to total GDP growth, but detracted from the living standards of many Australian working families”…
“Breaches of labour laws on wages and other conditions became common”…
“Immigration now lowers the incomes and employment prospects of low-income Australians.
“Settling early on an immigration program that is moderate in size and strongly focused on valuable education and skills will help us to avoid contentious and divisive political debate at a time when our society and polity are under great stress”.
It’s time the RBA put up a fight over this. It needs to stop being so woke on immigration and call out these downsides or it will NEVER reach its inflation targets.
