Wage growth slowdown under Coalition costs average worker $254 a week, study finds | Wages growth

The average Australian worker would be earning $254 more a week if wages growth had continued at the rate achieved under the last Labor government, according to a new analysis.

The progressive thinktank, the McKell Institute, will release a report on Wednesday analysing the impact of a slowdown in average weekly ordinary time earnings since the Coalition gained power in September 2013. Wages grew 4.6% in the period 2007 to 2013, compared to 2.5% under the Coalition government.

The McKell report found that men had been particularly affected by slow wage growth, as their average weekly ordinary time earnings would be $310 higher if the average rate of wage growth from 2007 to 2013 had been sustained from 2014 to 2020.

Women would be earning $152.23 more a week if their wages had grown at the same rate.

The McKell Institute blames a suite of government policies for suppressing wages including public sector pay freezes, an increase in visas for temporary migrant workers, inaction on wage theft and the gig economy, and failing to press the Fair Work Commission for bigger minimum wage increases.

Wages are set to be a major election issue, as Labor seeks to weaponise the government’s failures to close loopholes such as labour hire allowing workers to do the same job on different pay rates.

Wages were stagnating in Australia even before the Covid-19 recession. The budget forecasts wage growth of 1.5% in 2021-22, below inflation which is forecast to grow by 1.75%.

In May the treasurer, Josh Frydenberg, defended the government’s wages policy, arguing that a tighter labour market would drive them higher.

He noted that although “inflation is above wages this year”, inflation was temporarily high due to the end of free childcare, lower rents and petrol prices during the pandemic.

Asked about his failure to call for a minimum wage rise, Frydenberg replied the Coalition had “always been consistent with respect to leaving it to the FWC to make those decisions”.

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In May unemployment in Australia fell to 5.1%, raising hopes that better wage growth might be achieved in a tightening labour market. In June the FWC increased the minimum wage by 2.5% but delayed the rise for industries hardest hit by the pandemic.

The McKell report noted the FWC had cut penalty rates in 2017 in the retail, hospitality, fast-food and pharmacy industries. Labor and the Greens attempted to overturn the cut through legislation, but it was opposed by the Coalition and crossbench.

Despite the Morrison government promising to criminalise wage theft it withdrew new penalties for underpayment from its industrial relations reforms.

In March 2014 the Abbott government limited public sector pay rises to 1.5% unless cost offsets were found. In April 2020 the Morrison government froze public sector pay rises for six months during the Covid-19 pandemic.

The McKell Institute report, authored by its director of policy, Edward Cavanough, also pointed to Australia’s reliance on migrant labour – with more than 880,000 temporary visa holders in Australia before the pandemic with work rights.

Last week the Reserve Bank governor, Phil Lowe, told a conference in Toowoomba that before the pandemic “if there was a shortage in the labour market for a particular skill, firms could go overseas and tap the global market”.

“And that meant that if there was very strong demand for workers of a particular skill, the price – the wage – didn’t really move very much because you could go and get workers from overseas.

“You can’t do that at the moment. Or at least it is very hard to bring in workers with skills. It’s not necessarily the level of immigration that’s the main factor here. It’s the ability to tap global labour markets for areas where there is a shortage.”

Lowe said the RBA had heard that wages were rising in those jobs, while other firms were holding off waiting for international borders to reopen. A longer closure of the border could result in higher wages and inflation, he said.

The Labor MP Julian Hill, a member of the joint standing committee on migration, also blames the government’s decision to freeze the minimum rate of pay for workers on temporary skilled visas as one factor in wage suppression.

Under Labor the Temporary Skilled Migration Income Threshold was indexed, rising to $53,900 in 2013, but has been frozen at that level since 2014.

“From 2014 onwards every Liberal minister for immigration (initially Scott Morrison) has used their power to freeze the [threshold], eroding its real value every year and weakening its value as a safeguard for low paid Australian workers and jobs,” Hill told Guardian Australia.

On Monday Hill accused the government of “sneaky” changes allowing international students “to work unlimited hours” in agriculture, aged care, hospitality and tourism.

“There are more than two million Australians seeking more hours, but, rather than putting pressure on these industries to improve wages and conditions … the government is ensuring that these industries can keep wages as low as possible,” Hill told parliament.

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