Show me the Money!

Record-low wage growth is threatening social cohesion, RBA governor says


Record-low wage growth is threatening social cohesion, RBA governor says

"Flat real wages are diminishing our sense of shared prosperity," Philip Lowe said.

"The lack of real wage growth is one of the reasons why some in our community question whether they are benefiting from our economic success."

Between 1995 and 2012, workers saw average real wages increase by almost 2 per cent per year.

But since 2012, there has been little change in real wages."


New South Wales appears to be rewriting the economic textbooks

"When unemployment falls wage pressures tend to rise, as the economic theory goes.

However, for workers in New South Wales, Australia’s most populous state, employers appear to have missed the memo.

, no matter what the level of unemployment, it has no meaningful impact on annual wage growth in NSW."

New South Wales appears to be rewriting the economic textbooks

 

An article the other day was saying that from the mid 90s to 2012 , real wage growth was running at about 2% , since 2012 its been about 0,where health insurance has been rising at about 6%, not sure what it has been for utility bills.
For someone on 80k , they would be missing about $10,000 annually by 2017/18.
No wonder the days of banks handing out easy money had to come to an end.

 

Curious,

Does this include super which started in 1991, and will reach 12% by 2025?

Technically, it's extra pay. It also adjusts with inflation.

(Still not great when looking at relative income).

Though in construction I'm seeing a lot of companies hiring sub-contractors. Those sub-contractors are using 'sub-contractors', avoiding super, over-time, etc. Rampant from what I'm seeing.

 

It would be interesting to do a study on the cost of employment.

Including all costs - salary, tax, payroll tax, ‘red tape’, workplace insurances, etc etc etc.

I dare the cost to employ a person has steadily been increasing over time, Albiet the employed individual hasn’t seen the increase.

Just a hunch. And I have no data to support.

 

Not if your package includes super.

 

For many companies its gone down as they now hire staff as independent contractors or just use cheap labour hire which can be let go at a days notice.
For those that work in the gig economy it pays less than the minimum wage once they factor in all the costs.
No holiday pay or sick leave, not even superannuation.
Its like going back to the 1920s, but on the upside over stressed consumers can get cheap taxis , food delivery etc etc, with most off the money going offshore

 

My inlaws who own a small business in SEQ say you generally double the costs to employ each person. They employ tradespersons and labourers.

 

Ironic coming from a central banker. Low interest rates are precisely what has caused income inequality over the last decade.

Low interest rates discourage savings and encourage consumption, so it tends to prevent capital accumulation and stops productivity growth.

Similarly, low interest rates inflate asset prices, and suppress wages.

Thatcher talked about the best combination for economic growth and wellbeing being higher interest rates and lower taxes. We have the opposite now. I think Thatcher was right.

 

A lot of middle management has been removed in the last 10 years by tech. or outsourcing. Due to this there is less of corporate ladder nowadays with many people stuck in dead end jobs (often its only the grunt/low paying jobs that remain)

Clearly there are other issues that others have mentioned as well.

Do we really want median wages to go up as that may stoke inflation (things get more expensive anyway) and also may lead to increased interest rates

 

Be carefull what you wish for as eventually banks will have to stop writing out bigger and bigger home loans.
If the current trend with near zero real wage growth continues for a couple more years , your "average worker" on 80K a year will be almost 15K worse off annually after 8 or so years, then multiple that by 4-5 times for their ability to service a home loan, and over time it seriously diminishes their borrowing power
For years banks have assumed that with good wage growth the ability to service a loan becomes easier and lessons their risk , at the same time property continues to rise in value , and in turn then can continue to write out bigger loans.
It also causes more problems than it solves if the economy faces a major shock.
Its pretty hard to drop interest rates to stimulate the economy , if they are already at emergency levels.

 

Super was created out of a payrise foregone IIRC (a trade off at the time between employers & unions)

TRP also includes holidays & other leave

.

Soon there'll only be the directors and labour left having seen 'middle-Management' removed several times since the 80's.

 

If you can grown your income more than the average that's good for you as you can outbid more people to live in the place you want or purchase the IP you want.

clearly wrong assumption as wage growth has been far from good the last few years of the property boom

 

Greater Sydney’s unemployment rate starts with a 3, so where is the promised stronger wages growth? | The New Daily

"Once upon a time, there used to be talk of a “capital strike” when businesses withheld new investment in the economy. We are now seeing a labour cost strike – businesses withholding wages increases despite a shortage of suitable labour."

"What makes the lack of wages growth all the more curious is that businesses are increasingly reporting it’s difficult to find suitable labour – yet they’re not prepared to pay more to obtain it."