Ian Harper shreds ‘wage-inflation spiral’ scaremongering

Professor Ian Harper from the University of Melbourne has downplayed the prospect of across-the-board pay rises or a ‘wage-price spiral’ in the wake of the increase in the minimum wage.

Harper, who was the inaugural chairman of the Australian Fair Pay Commission, says employers no longer face the 1970s-style indexing of pay to the consumer price index that heightened the likelihood of a wages spiral:

“Sally McManus is quite right to point that out as an experience in the past,” Harper said, following recent comments by the Australian Council of Trade Unions (ACTU) secretary that any insistence the workforce would receive pay increases above 5 per cent was “boomer fantasy land”…

Harper said the link between the minimum wage decision and broader salary growth had been “drawn too strictly, and there’s a lot more water to go under the bridge”…

McManus said employers’ calls for constraint were part of a campaign designed to keep wages low: “One-off pay rises also do not change the fact that our bargaining system has stopped delivering wage growth for working people.”

“If inflation returns to normal levels then that will obviously influence what increases unions are fighting for, but right now working people cannot continue to see real pay cuts after a decade of record low wage growth,” she said.

The cold hard facts are that there is no ‘wage-price spiral’ building. Nor is it even possible in Australia. Centralised wage fixing ended decades ago. The power imbalance against workers is simply too great.

Besides, if economists, the media and the RBA are so worried about domestic inflation, they should go after businesses that continually jack up prices to juice their profits.

They should also demand East Coast gas reservation and coal/gas export controls and super profits taxes to delink Australian energy prices from the global market. This would have far more impact in reducing inflationary pressures than lazily attacking workers whose real wages (and share of national income) has fallen inexorably over decades.

Stop blaming the victims for inflation. Leave workers alone.

Unconventional Economist

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