Australia’s low wage growth is by design

Over the weekend, ABC business reporter, Gareth Hutchens, published an article suggesting that “stagnant wages” and “labour market ‘slack'” are part of the “federal government’s plan”.

Hutchens sites the collapse in wage growth over the past decade or so:

Collapsing wage growth over the past decade.

He then notes that the mass immigration policy pursued by the federal government meant that despite solid jobs growth, overall labour market underutilisation rose because there were more workers arriving every year via immigration than there were jobs being created:

Well, what the government hasn’t made explicit is that many of those jobs were going to imported labour.

That’s why that job creation wasn’t helping to tighten the labour market and generate wage pressures.

On the contrary, it was preventing the unemployment rate from falling below 5 per cent.

Coincidently, Treasury and Reserve Bank officials have been using an unemployment rate of 5 per cent as a deliberate policy tool in recent years to suppress wages and inflation growth.

So the government has been working in tandem with them.

But significantly, those same officials have recently admitted that the economy could have handled a lower level of unemployment over the five years to 2020, somewhere between 4.5 per cent and 5 per cent.

Of course, Hutchens could also have pointed to the Australian Treasury’s own research that the overwhelming majority of Australia’s jobs growth went to migrants between the 2011 and 2016 Census’, thus keeping unemployment elevated:

Recent migrants accounted for two-thirds (64.5 per cent) of the approximately 850,000 net jobs created in the past five years. For full-time employment, the impact is even more pronounced, with recent migrants accounting for 72.4 per cent of new jobs created.

Migrants took most jobs between 2011 and 2016.

Big Australia advocate, Professor Peter McDonald, released similar findings when he too analysed the 2016 Census:

The permanent and temporary skilled migration policies established by the Australian Government from 1995 played an important role in meeting that labour demand…

From July 2011 to July 2016, employment in Australia increased by 738,800. Immigrants accounted for 613,400 of the total increase…

Now the Morrison Government is seeking to suppress wages further by adding to the labour market’s spare capacity. It recently uncapped the number of hours that international students can work, alongside creating a new type of foreign worker visa – the subclass 408 (temporary activity) visa – enabling so-called temporary visa holders working in ‘critical’ sectors like hospitality to extend their stay by up to 12 months.

The Morrison Government has also flagged that it wants to give Australian businesses easier access to foreign workers by:

• Abolishing labour market testing requirements.
• Lowering costs and speeding up approval times for importing foreign workers.
• Expanding the skilled occupation list to include almost any role.
• Providing all ‘skilled’ visa holders with a clear pathway for transition to permanent residency.
• Granting ‘skilled’ visa holders priority access to flights and hotel quarantine ahead of stranded Australians.

If pre-COVID levels of migration are restored, an extra 180,000 to 200,000 workers would join the Australian labour market every year, putting upward pressure on unemployment and placing downward pressure on wages. This, in turn, would make Treasury’s and the RBA’s new 4.5% unemployment target an impossible goal.

Australians experienced a decade-plus of crushed wages and living standards on the back of extreme immigration. This failed policy must not be allowed to return.

It’s time for Labor to take a stand. The Coalition’s proposed reforms are immigration’s equivalent of Work Choices 2.0 – designed specifically to neuter Australian workers and fatten company profits. So why is Labor remaining dead silent on this issue?