Australia’s low wage growth: Bosses’ greed shows capitalist contradictions
Alison Thorne
issue 26
July 2017

Treasurer Scott Morrison has a huge dilemma. In commentary leading up to the May Federal Budget, he described low wage growth as being one the “biggest challenges” for the Australian economy. This view is shared by Philip Lowe, head of the Reserve Bank of Australia, who is concerned that households are suffering from a “sobering combination” of high debt and slow wage growth, warning that this will be a drag on spending.

Wage “growth” in Australia is currently so low that workers are going backwards. For the year to 31 March, Australian Bureau of Statistics (ABS) figures show wages rose by 1.9%, well below the Consumer Price Index increase of 2.1%. Australia is experiencing the lowest rate since the current records began in the 1990s. Taking a longer view, the growth in male wages is at the lowest rate since World War Two.

For the last four years, wages have been falling due to a range of factors. The end of the mining boom is one. But a key factor is the decline in full-time employment, with growing numbers forced into insecure work. Sham contracting arrangements are rife across many industries, with about a million workers engaged as “independent contractors.”

Back to capitalist basics. If we look to the analysis of Karl Marx, we can see what’s worrying Morrison, the Minister responsible for the health of the Australian economy. Marx’s genius is that he unpacked capitalism to show how the system works. It needs to continually expand and grow. Based on competition, each business must try to get ahead of its rivals or be swallowed up or put out of business. The aim of each enterprise is to sell more goods and services and hold down labour costs. But there’s a flaw in all this. If wages decline across the economy, the market gets flooded with products and services that fewer people can afford to buy. Marx called this the crisis of over-production.

What Morrison and Lowe understand is that the economy will almost certainly nosedive as workers have no option but to cut discretionary spending. This is already reflected in declining Consumer Confidence measured by the Westpac-Melbourne Institute monthly survey. After the May Budget, the survey index fell to 98 points, which indicates a pessimistic outlook. More than a third of households said the Budget would make their finances worse.

Morrison’s budget funds tax cuts to corporations by increasing the taxes collected from workers and jacking up fees for education. But the figures don’t add up. Morrison’s projections see the budget back in surplus by 2020, but these are premised on imaginative predictions of economic growth and increased tax revenues based on a doubling of wage growth.

Unionists protest blatent wage theft by 7-Eleven.

The government is in a bind. It needs the Australian economy to grow but is committed to implementing policies — including efforts to restrict the ability of unions to organise — which foster the very conditions that have seen Australia becoming more unequal.

Last year the Evatt Foundation produced a report, The Wealth of the Nation: Current Data on the Distribution of Wealth in Australia, which reported that Australia is the fifth most unequal country in the OECD. Since 1970, Australia has become wealthier, but much more unequal. The wealthiest 10% own half the nation’s wealth. This layer is enriching itself primarily at the expense of the 50% below it. So-called “middle Australia” — made up largely of wage earners — is getting squeezed. The wealthiest are on track to get even richer. ABS data released in June highlights that the share of Gross Domestic Product (GDP) going to households is at a 50-year low. In contrast, the current share of GDP going to profits has risen to a five-year high of 27.5%.

A sorry record … Since the Coalition government was elected in September 2013, it has been going after workers. Its first Employment Minister, Eric Abetz, warned “weak-kneed employers” not to agree to wage demands from unions. The Coalition then changed the guidelines regulating contracts for cleaners in government buildings, resulting in wage cuts of up to $5 an hour for many cleaners.

The federal government remains at war with its own workforce. Wages have been frozen for two-thirds of the Federal Public Service since 2014 as unionists stand their ground, refusing to trade off decades of hard-won working conditions in return for pay outcomes that do not keep pace with the cost of living.

On the Coalition government’s watch, there’s also been a host of scandals with franchise operations — Domino’s Pizza, 7-Eleven, Caltex and Pizza Hut — being exposed for practices that amount to wage theft. Even celebrities are not immune from attracting headlines, such as TV chef George Calombaris, whose profitable restaurant empire reportedly failed to pay 2.6 million dollars in wages.

The current Employment Minister, Michalea Cash, is virulently anti-union and claims amongst her achievements the re-launch of the Australian Building Construction Commission (ABCC) in late 2016. Under the new ABCC regime, major builders are barred from tendering for government work unless Enterprise Agreements with unions are torn up, decimating pay and conditions.

The share of the economic pie going to workers will fall further in July with the phased implementation of the Fair Work Commission’s cuts to Sunday and public holiday penalty rates. This will hit almost 700,000 workers in the retail, hospitality, pharmacy and fast food sectors.

These sectors already have some of the lowest paid workers, with disproportionate numbers of women and young workers. The cuts to penalty rates will widen the abysmal gender-based pay gap. The impact on students from working class families, who face rising fees at the same time they face pay cuts, will be devastating.

While, on the surface, the penalty rate cuts are a gift to employers, there will be consequences. Retail, hospitality and fast food are sectors particularly sensitive to reduced consumer confidence. Businesses rely on workers with discretionary income to spend. But when there is not enough to cover the groceries, the rent, the electricity bill and pay for the kids’ school excursion, something must go.

For almost one in five workers, the only way they get any increase in pay is through the annual Minimum Wage Case, determined by the Fair Work Commission. In June, it ordered a weekly increase of $22.20. The Australian Council of Trade Unions (ACTU) argued for $45 a week. Many of these workers are those hit by the penalty rates cut, meaning they will get no net gain. In an interview on Channel 7s Sunrise, ACTU Secretary Sally McManus made it clear that the union movement was not happy. She pointed out that, with profits up 40% in the last 12 months, the wage order is not enough. She characterised the current minimum wage as a poverty wage that workers could not actually survive on.

9 September 2016: Members of the Community and Public Sector Union strike and rally outside Prime Minister Turnbull’s office to protest the pay freeze for more than 1,000 days!

Time to walk the talk. The union movement is a well-oiled machine when it comes to describing the problems working people face. The news releases go out, interviews happen and union officials tell the story that workers are getting screwed while bosses’ profits balloon. The social media is slick, the memes get lots of shares, and the online petitions attract broad support. The elected officials will even get some rank-and-file members out on the street to campaign — in marginal parliamentary electorates, of course. Because underpinning all of this is their belief that the solution ultimately lies in changing which party is in government.

Getting rid of the Coalition government would be welcome! But replacing it with a government formed by the party that legislated our current industrial relations system, including the Fair Work Commission that cut penalty rates, is not the solution!

It’s crucial that the growing campaign to defend penalty rates learns the lessons from the Your Rights At Work campaign. The immense potential of this campaign to stop the anti-union Work Choices legislation was frittered away when its goal switched to electing an ALP government. The central objective of the current campaign must not be to change the government but to defend and extend penalty rates.

Low-wage growth and a widening chasm of inequality is not a phenomenon confined to Australia. Wage stagnation is happening across all advanced capitalist countries. We need to end this race to the bottom.

We demand:

  • secure employment with full leave entitlements;
  • the minimum wage be set at a living wage level, high enough to lift workers out of poverty and keep them out;
  • penalty rates for working weekends and public holidays;
  • prosecution of bosses who engage in wage theft;
  • end junior pay rates and close the gender-based pay gap;
  • end government interference in trade unions — for workers’ control of our trade unions!

If business leaders protest that the profit system can’t afford these very reasonable demands, we should respond that the capitalist class is unfit to rule. Stop managing the capitalist crisis off the backs of workers!

Alison Thorne is a workplace delegate in the Community and Public Sector Union. Contact her at alison.thorne@ozemail.com.au