Is Labor or Liberal better for wages?

PM Morrison is his media team are trying to pass the buck on their decade of wage falls:

Despite pursuing the Coalition over stagnant wage growth, the Opposition Leader conceded on Sunday night he would not ensure wages would rise about inflation if Labor was elected, instead saying he would support minimum wages increases while trying to address structures to improve real wages.
On Monday, Mr Albanese highlighted previous warnings by the Reserve Bank of Australia that one of the weaknesses in the Australian economy was falling real wages, but acknowledged he could ensure real wage growth.

“The truth is we have had flat lining wages over 10 years. The key to lifting wages is lifting productivity. One of the things … I will do is to convene a full employment summit.” Mr Albanese told reporters on Monday morning.

“We will have a full employment white paper. We will work with business and unions to enterprise bargaining, but we will change the Act, so secure work is an objective of the Act.”

The record of the Coalition on wages over the past decade is a disaster:

What began after 2011 as a terms of trade shock, which cut the nation’s pay via tumbling commodity prices and therefore many salaries within it, became a policy of deliberare wage suppression via mass immigration until COVID shut the borders.

Looking ahead, nobody can guarantee wage gains. There might be a global depression for all we know.

But there are macroeconomic principles to put in place to ensure the best possible chance of lifting living standards. They are not remotely controversial and pretty easy to boot.

They fall into two categories. Wages positive policy measures. And the removal of wages negative policy measures.

In the first category, you need rising productivity and a strong labour market to give workers barginaing power.

In the second category, you need low immigration, decent levels of competition, industrial relations integrity and unions.

Is either side proposing any of this? Not really. But Labor is better.

Rising productivity emerges when an economy gets more efficient. This can come from investment, a lift in automation, infrastructure or the more productive use of capital. Bill Shorten’s reform platforn was a good example. But we all know what happened to that so neither party is proposing such.

The labour market is strong owing to post-COVID reopening and a long tale of fiscal and monetary stimulus. This will diminish ahead no matter who is power and the forthcoming global recession will weaken the labour market.

As for policies actively holding down wages, Labor can point to a better immigration mix in its use of permament residents over short-term visas. And it will probbaly be better at enforcing labour market laws destroyed by the wild west Coalition migration program.

It may also deliver a little more bargianing power to unions and will work to reduce insecure work which will help. Underemployment has a better correlation with wages than unemployment.

The problem is, if you’re not also reforming to lift productivity then higher wages mean a lower profit share for capital and fewer jobs. So it is not sustainable.

Labor has the edge on wages but not for any period of time and neither party is very good.

Houses and Holes


  1. Clearly Labor, no question about it.
    The coalition has pursued a deliberate policy of wage supression .
    Getting rid of the foreign temp workers will be a massive massive shift of labour market power away from employers and to employees.

  2. Wage suppression has hidden the real mismanagement of inflation in this country.

    I think our inflation rate, while the headline number is lower than some other countries is actually worse than many of them. There’s relatively better inflation (wages) and bad inflation (every other good).

    US is seeing higher wage inflation contributing to its inflation rate (e.g. 7% inflation rate minus 4.7 wage rate = 2.3% net inflation rate on consumers.

    We have 5.1 inflation but only 2.3% approx growth in wages = 2.8% inflation rate on wage earners (AUD).

    When Scomo and the Liberal party are comparing inflation rates to the US my initial reaction is that it isn’t doing them any favors once you dig just a bit deeper. The average wage earner is going backwards more here than the US or to reword this more of our inflation is cost based, and less is locally wage based.

    If our wages were matching cost inflation our inflation rate would be much higher than other countries. Australia has become an expert in suppressing any mechanism for inflation to translate into wage gains over the last few decades.

    • Jumping jack flash

      One only needs to check the inflation of house prices and the distribution and allocation of the lion’s share of new debt. We are fairly lucky that most of the debt inflation over the whole period of the golden age of debt, and the post GFC period debt, was confined to houses. Imagine if we had an extra 9 trillion debt dollars sloshing around in the general economy?

  3. The “workers’ party” has deliberately run dead on jobs and wages. They know that the COVID immigration freeze is what has cut UE to 4%. But they will not say a word against Morrison and Frydenberg’s lies.

    The idea that there is any substantive difference between Labor and Liberal on restoring crushing levels of mass immigration is fanciful. Labor’s virtue-signalling is the only difference. Jobs and wages will still lose.

  4. It isn’t nominal wages vis a via an index, you should be looing at, it’s wage share.

    I don’t know the figures, but I know what we need to be looking at.

    What percentage the economy do workers have a claim to?

    • Exactly. That’s the main thing that matters in the long run w.r.t day to day living with real goods/services. If that stays the same then as a percentage of wages people are no better/worse off. Anything else is really just redistributive.

  5. Jumping jack flash

    Well to answer the question Labor or Liberal you need to first answer the question about who will most likely make the debt grow, and if unsuccessful, who is more likely to implement equivalent measures to debt growth, and what would that look like.

    Its a tricky one. While Labor may be more inclined to implement a UBI and save the debt economy using government debt, Libs are more likely to open up the super vaults to save the economy with people’s own money.

    Both have pros and cons. But consider that we know there’s two trillion dollars of super, and two trillion outstanding mortgage debt dollars that harvest interest from the economy every minute they exist – its almost as if super was created to pay it off!

    On the other hand, do we need more government debt to prop up the debt economy?

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