Always the corporate shill, AFR Economics editor John Kehoe has warned the Fair Work Commission (FWC) against awarding low paid workers a CPI-indexed pay rise, claiming it would drive a US-style wage-price spiral:
The Fair Work Commission’s minimum wage outcome due this month will be one of the most important decisions affecting the economy…
If that relatively large wage rise was limited to just the 180,000 minimum-wage workers, it could probably be digested by the economy without too much trouble.
The bigger challenge is that about 25 per cent to 30 per cent of the workforce have their pay closely linked to the minimum wage increase, via industry awards and some enterprise bargaining agreements. Not all of these people are low paid.
The Fair Work Commission must be careful about the signal it sends to the broader labour market and the impact on inflation psychology.
Moreover, state governments in NSW and Victoria are preparing to lift their public sector pay caps, up from a modest 2.5 per cent and 1.5 per cent respectively…
An across-the-board increase of 5 per cent for about 3 million workers would be dangerous for the labour market and economy over the next few years…
US inflation is above 8 per cent and wages are growing more than 5 per cent.
Has John Kehoe bothered to examine the Q1 Australian national accounts, released yesterday by the ABS? Because if he had, he would have seen that company profits soared, leaving workers in their dust:
In fact, average compensation per employee rose only 2.2% in the year to March despite soaring labour productivity:
As such, wages’ share of national income has plunged to just 49.8% – close to the lowest level on record:
If John Kehoe is so concerned about inflation, perhaps he should call on his business lobby mates to stop price gouging consumers. Because, if anything, Australia is experiencing a profit-price spiral.
Similar arguments apply in the US, as explained by Economist Michael Hudson.
