We need to talk wages

Discussion in 'Property Market Economics' started by hammer, 29th May, 2019.

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  1. QldKoolies

    QldKoolies Well-Known Member

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    Your first point is arse about face to me, that is I think rates are low because household spending is low which keeps inflation low. RBA say low wages growth is the reason for low household spending, i’m inclined to think it’s being soaked up by increasing household debt and off-shoring. This is eased by rates but requires regulation to control borrowing to stop the vicious cycle - including things like afterpay, credit cards, store cards etc. The reduced spending keeps business profits slim and forces innovation to achieve growth without growth in wages - systemising and automation. The average joe will not be brought along by growing businesses that are super efficient.
     
  2. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Just to clarify my first point:

    Low interest rates encourage consumption and discourage savings. That is good for our standard of living in the present, but it is the savings that lead to higher standards of living in the future. This is what I mean by real capital accumulation, real savings, which is now being substituted for central bank printed money.

    Societies that lack savings and capital over time become less productive.

    Yes, we are productive now, but the process that leads to that productivity is being tampered with.

    I think much of what you are saying is true also, that wages are being consumed by debt repayment.

    But if we look at wages as being a function of productivity, then we have to look at why productivity growth has been low over the last decade. And one of these factors is low interest rates and low savings rates.
     
  3. TSK

    TSK Well-Known Member

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    Unless your contract says you can you would probably be in breach of your agreement, if dealing with PII probably the law.
     
  4. gman65

    gman65 Well-Known Member

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    Well much of that can indeed be directly attributed to the massive hole in stamp duty that opened up. In 2017 it was 6bn plus 2.4bn land taxes. All the big billion plus projects they forward budgeted for rising stamp duty, not falling. Never mind tax take reductions with the flow on affect for construction and other related industry.

    Blamingthe federal LNP was an easy cop out, but I think most of their numbers were probably fairy dust anyhow.

    Unless the Melbourne property market is reinflated quickly, Vic is heading back to its early 2000's troubles.

    GDP soon to come out shows the whole country's economy is limping along way below the rosey RBA forecasts.. The lack of wage growth is simply a part of that.
     
    Last edited: 29th May, 2019
  5. Illusivedreams

    Illusivedreams Well-Known Member

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    Is GDP per capital adjusted for currency and the fact that Yuan is terribly undervalued. Artificially.
     
  6. Cate Bell

    Cate Bell Well-Known Member

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    One word, recession. You need a second job or a side hustle, or perhaps start your own business.
     
  7. Jana

    Jana Well-Known Member

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    Though your argument is partly true, low interest never push for less saving. It rather increase borrowing and increase the money rotation. So it keeps business environment vibrant hence motivate people with less unemployment and redundancy. This is just based on book theories..
     
  8. Propertunity

    Propertunity Well-Known Member

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    50+ years ago when I was a kid in primary school, I recall conversations then about "If you want to compete with countries where their workers get paid a bowl of rice per day, then you'll end up working for a bowl of rice per day too".
     
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  9. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Well, it's not just based on books - we can observe it. No wage growth in the zero interest rate decade.

    In a functioning economy, savings is where credit comes from. I save, you borrow. So savings is the lifeblood of a capitalistic economy.
     
  10. hammer

    hammer Well-Known Member

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    Is the lack of wage growth just an Aussie thing? How about other countries? Anyone OS at the moment Cary to share?
     
  11. PandS

    PandS Well-Known Member

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    We had it too good for too long people forget that wage raise is not a given thing
    Wait till people experience pay cut or lost of jobs.
     
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  12. PandS

    PandS Well-Known Member

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    American had pay cut during their down turn and lot of people out of work
    for decades they only have minimum wage rise 2% and less, it only takes off in the last few years at 3-4%
     
  13. Herbert

    Herbert Well-Known Member

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    Try being self employed!

    A lot of self employed people have seen earnings effectively stagnate for for a decade.
     
  14. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    For all the talks about one has to be this and that to get pay rises, not many can and that's exactly the reason why few who can get to rise above the rest, if every one can then there will again be equilibrium and stagnation.


    I believe we are currently in an overlap-period where jobs are still retained but there is an active push towards exponential productive gains from AI based automation across industries, hence job losses are not as rampant YET but salary is not growing (or very selectively growing for niche areas aka the ones who are part of automation process)

    Gig economy ie temp task based jobs have become easier to get but at huge hit to the pay-grade, so it may be great for some one who is using it as a side hustle, its absolutely disastrous for someone whose jobs are #Gigified,

    If salary have been stagnant for last few years its going to get worse.
    I believe Automation and communication advances AR/VR etc in coming decade or two will have a far reaching impact on almost everything but most importantly on RE investment and its valuations.

    Just curious if there is general consensuses amongst many here that its becoming harder and harder to get real income raise,
    What is going to drive house prises higher and higher in next decade or two given that there is already an excitement of what this extra borrowing power is going to do to already stretched valuations in some cities.

    the usual trick of
    Drop IR/AR = increase borrowing capacity = excited Aussie borrowers = higher debt = growth, Repeat.
    This model may be coming to an end given that RBA has very few ammo left at its disposal, what next then?
     
    Last edited: 30th May, 2019
  15. The Falcon

    The Falcon Well-Known Member

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    Current YoY inflation is around 1.5%. I would consider it unusual for an employer to be offering above inflation pay rises across the board unless ;

    a) There was a supply / demand imbalance - i.e. shortage of labour bids up wages
    OR
    b) They were particularly generous

    Even the latter has an end point, when wage growth compounds and outpaces the market, a time will come when a pause is the only reasonable course of action.
     
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  16. inertia

    inertia Well-Known Member

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    Let me flip this one - employers expectations are that the employees continually take on more, become more competent, more experienced, and more skilled - so theoretically more efficient and productive. If I am continually becoming more productive, should I not receive some of the benefit of that increased productivity?

    Personally, wage growth is not what I'm looking for at the moment, and definitely dont expect it anymore (IT industry). But equally, employers who think their only tool for motivation is a pay packet are going to find themselves suffering. Early on in my career I was definitely underpaid (found out later I was on $10k less than the guy sitting next to me - purely due to how we were hired - and I was on $40k base at the time so it was significant), but I knew my boss was batting for me to get my pay corrected (big company with global policies on pay raises), but I was loyal to him and worked hard for him - even though I could have gone to a different company for a pay bump. He wasn't just a manager, he was an actual leader, and there really seems to be a lack of that out there.

    Cheers,
    Inertia
     
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  17. standtall

    standtall Well-Known Member

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    There are exactly two ways average wage can grow: 1) we increase our productivity as a nation 2) we pass on more of national income to citizens.

    1) National productivity or GDP is a long term measure and we really aren't killing it lately. We need to increase the ratio of high wage earners (doctors/engineers/start up gurus) by improving education system, up-skilling existing workforce and encouraging high skilled immigration.

    2) Passing on more of national income to citizens is where taxes come in. A tax cut is an excellent way of increasing disposable wages. A government budget should never go in surplus at the expense of higher taxes because higher taxes will almost guarantee low wage growth even if GDP keeps growing.

    Lastly (and most importantly) it's counterintuitive to expect taxpayers to up-kill or put extra work into increasing their own wages with a punitively progressive taxation system like we have it in place in Australia. It's not hard to find people who actively get out of the way of promotions because small increase in after tax income is often not worth extra hard work and responsibility. Unfortunately this goes on to hurt everyone including those we are trying to help by raising taxes.
     
  18. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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    from my (and my friends) experience (IT sector) the salaries are growing ~ 8-10% per year, (starting from avg IT wages) over the last 10-15 years, but you have to acquire more skills & experience, be in top 10%, and be active in searching right job. Once you reach 150-200K level, it's not growing so fast, so if you want to get more from your professional services the only thing you can do here is to start a business in parallel
     
  19. inertia

    inertia Well-Known Member

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    yeah, nah. I have heard this argument often enough, but I'm yet to see any actual examples. You are never going to bring home less money with a pay rise, but the pay rise may not be significant enough to offset the effort - that is not a tax issue.

    Cheers,
    Inertia.
     
  20. inertia

    inertia Well-Known Member

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    Interesting. I was working for a telco vendor from 2001-2010. They were suffering the performance of the US market, so while our segment was growing in profitability, the company was struggling and shedding jobs. The last few years I would have said IT wages were growing at a declining rate, getting towards stagnating - certainly in telco and managed services as more is moved offshore and automated.

    Cheers,
    Inertia.
     
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