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There’s an obvious reason wages aren’t growing, but you won’t hear it from Treasury or the Reserve Bank

TJ Ryan Foundation Research Associate, David Peetz, writes in The Conversation (9.9.19) that, after decades of research showing the link between union power and wages growth, government economists don’t want to talk about it.

‘Wages growth for Australian workers is among the worst in the industrialised world. For more than a third of workers on individual contracts, wages aren’t growing at all.

‘This is odd, given Australia is in a “record” 28th year of economic growth with apparently low unemployment and a supposedly strong economy.

‘Government economists have floated a range of reasons, from blaming workers not changing jobs enough to caps on public-service salaries. But the most obvious factor is the loss of worker power due to the decline in unionisation over the past three decades.

‘… As the late Princeton University economist Alan Krueger pointed out last year, monopsony power – the power of buyers (employers) when there are only a few – has probably always existed in labour markets “but the forces that traditionally counterbalanced monopsony power and boosted worker bargaining power have eroded in recent decades”.

‘So yes, there are a number of reasons why workers have less power, and why wages growth is weaker, than in the past. Among them, though, we cannot ignore the critical fall in union bargaining power.’


Australia has record job vacancies, but don’t expect higher wages

Jeff Borland writes in The Conversation (25.11.21) about high reported job vacancy numbers, observing that much of the recovery in employment seems to be happening without big wage increases.

‘Job vacancies in Australia are at a record level. The Australian Bureau of Statistics’ job vacancy rate, measuring the proportion of available jobs currently unfilled, is now more than 2.5% – the highest level since the series started in the late 1970s.

‘This statistic gives weight to all the anecdotal talk about labour shortages in Australia. When employers have difficulty finding workers to hire, job vacancies stay unfilled longer and the vacancy rate increases.

‘In normal times a high vacancy rate would indicate economic trouble. It would be evidence of a major underlying problem in the Australian labour market, such as workers not having the right skills for new jobs being created.

‘But these are not normal times. This record job vacancy rate seems largely explained by the impact of COVID-19, rather than signalling a problem with how the labour market is operating.’

The TJRyan Foundation does not guarantee the accuracy, currency or completeness of any information or material available on this website. The TJRyan Foundation reserves the right to change information or material on this website at any time without notice. Links from this site to external, non-TJRyan Foundation websites should not be construed as implying any relationship with and/or endorsement of the external site or its content by the TJR Foundation, nor any commercial relationship with the owners of any external site. Should any TJRyan research project be funded by an individual or organisation the source of funding will be stated beside the research report. In all other cases contributions are provided on a pro bono basis.
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