The Australian unemployment rate is now at 6%. That’s the highest level in decades. Unfortunately, the job loss tally seems to be growing: Toyota, Alcoa, Qantas…
But sacked workers aren’t the only ones facing bad news.
While Employment Minister Eric Abetz warned that Australia faces a ‘wages explosion’, the problem Australians are facing is the exact opposite.
Australian wages are falling quickly
There are a number of factors at play here. First, many of those who have recently lost their job will have to take lower positions at much less pay.
As unemployment in Australia grows, wage growth will flatline. After all, when people are grateful just to get a job, they won’t quibble about the pay.
The same principle applies to people already in a job. When there is a queue of unemployed people clamouring for your job, people are less likely to ask the boss for a pay rise.
And it shouldn’t be a surprise if your boss cuts your hours, either. In order to cut costs in the slowing Australian economy, bosses are slashing their wages bills by cutting hours. According to the ABS, underemployment is at 2010 levels.
Rising unemployment is not the only culprit for lower wages
But it’s not just growing unemployment at play here, either. Dun and Bradsheet’s business survey forecasts capital investment to rise by 19% this year.
This has the potential to lower wages in certain jobs as new hires are frozen in favour of capital investment and automation.
And here’s the final factor that’s pushing wages down: the Australian Government.
They’re sending the message to businesses that they should take a hard line in employee pay negotiations.
Eric Abetz accused employers of being ‘weak kneed’ in their dealings with employees, and blamed Toyota and SPC Ardmona’s troubles on high wages.
The government has also asked the Fairwork Commission — which is reviewing penalty rates — to take into account the concerns of business and the wider economy when it makes its decision. In other words the Government is siding with employers.
It’s not a new concern for the government. Tony Abbott and Eric Abetz have spoken previously of the negative effects of penalty rates on employers, while the issue of cutting penalty rates is a hot topic among back benchers.
Victorian Liberal MP Dan Tehan is the latest, saying he thought penalty rates should be cut and that he wasn’t alone in the Liberal party.
Between unemployment, job losses and low wages, the year is looking bleak for workers in Australia. Don’t expect a pay rise.
Callum Denness
Contributing Editor, Money Morning
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