They don’t make wages breakouts like they used to. A few years ago, the much-discussed, never-quite-seen phenomenon apparently amounted to an “economically irrational assault on a scale we have not witnessed for a quarter of a century”. Everywhere you looked, there were harbingers of its imminent arrival – the breakout would be summoned into being by the right to strike, the NBN, or by wage rises in the transport industry or community services. Now the wages breakout seems to amount to a couple of Taragos full of tradies on the North-West shelf.

According to unnamed Shell executives cited in today’s edition of The Australian, building labourers or wharf workers can earn around $200 000 in the oil and gas industry. When I read that, I wondered how many workers in oil and gas might be on that much. According to the ABS, the answer is: not many.

At the time of the last Census, in 2011, there were 21 building and plumbing labourers employed in oil and gas. I don’t mean 21 000 or 2 100 – I mean 21. Of those 21, five earned more than $2000 per week (around $104k) at Census time. As for wharf workers, there were 12 “freight and furniture handlers” in oil and gas at Census time, with eight of them earning more than $104k. So we’re talking about a total of 17 building labourers and wharfies on over $104 000, let alone the $200k mentioned in the piece.

A few other occupations are in the sights of the nameless Shell executives. Some welders with specialised skills, we’re told “can demand more than $400 000, with one industry leader saying demand could reach $500 000”. The ABS data suggests that most welders in oil and gas don’t see anything like this income. There were 124 welders in the industry at Census time, with around half (58) of them earning less than $104k. That leaves 66 welders on more than $104k – it’s possible that some of those 66 can command $400 or even $500 thousand, but you could probably fit them all in a Tarago. The data also show that 329 accountants and 178 human resource managers in oil and gas earn over $100k, but oddly these people seem not to be the focus of the wages breakout scaremongering.

Now it’s true that these figures are nearly two years old. Maybe those few dozen people have received large wage rises since then. But ABS survey data shows that average earnings for full-time non-managerial adult employees in oil and gas rose were 5.7% higher in May 2012 than two years earlier in May 2010 – that’s not the sort of wages growth to give mining executive palpitations. If there’s been a breakout, it must have been in the past 12 months – but that would put the oil and gas sector at odds with the broader mining industry, in which the Wage Price Index rose by a relatively modest 4.2% over the year to March.

The complaint about wages isn’t limited to oil and gas. The broader industry seems to think that wages in the industry are too high. I find this difficult to reconcile with the industry’s other oft-repeated complaint about a lack of skilled workers. The usual market response to an undersupply of something is for its price to rise.

The complaints about wages in mining don’t seem to me to have much of a basis in fact. While wages in the mining industry have risen at a pretty strong pace since the boom kicked off in 2003-04, they haven’t risen nearly as fast as the the prices that mining firms receive for their output.

producer wages

Workers in the industry have received solid real wage rises, as their pay has grown faster than CPI. But the real producer wage – the real cost of employing people, measured using output prices – has fallen pretty sharply since the boom started. If you don’t believe my charts, have a look at Martin Parkinson’s.

producer wages 2

Because the industry’s total wages bill hasn’t grown as fast as the industry’s income, the wages share has fallen. The latest estimate by the ABS put the wages share in mining at around 20% of total income, down from around 29-30% in the pre-boom period.

wages share in mining

All of which means that the mining industry seems to be a pretty poor candidate for a scare about a wages breakout. A falling wages share is pretty close to equivalent to a fall in real unit labour costs – not what you’d expect from an industry suffering an apparently dire competitiveness problem.

While we’re supposed to get scared about the wages breakout, the real villain is off screen: the exchange rate. When the dollar soars, that makes our exports less attractive to foreign buyers. It also means that the cost of building a project here will rise, when measured in American dollars, even if the price in Australian dollars hasn’t changed. A Business Council report last year pulled this same bait-and-switch – talk about costs in US dollars, then point the finger at domestic sources.

It’s just the same as any other price. Say that the price of an MBA at an Australian university stays the same price – it’s $AU100 000 one year, and $AU100 000 the next. But between those years, the value of the Aussie dollar soars. It’s true that the degree is now more expensive for international students, and so the ‘competitiveness’ of our education industry has been reduced. But would you really look to cut academics’ wages in response to this external shock?

That’s what much of the talk about Australian competitiveness seems to amount to – the proposition that wages should fall whenever the exchange rate rises, so that the cost of our goods and services remains the same when priced in international currency. This seems impractical, unfair, and at odds with the shock-absorber role that our floating currency has played for the past three decades. It is particularly churlish for resources executives, having received the benefits of the commodity price boom that has driven our dollar way up over the past decade, to demand protection from that appreciation in the form of wage restraint.

A few weeks ago I wondered where the anti-Fair Work Act campaign would turn now, having seemingly moved on from the wages breakout, the productivity crisis, and the scare around industrial disputes. It looks like we’ve gone full circle.

Note: The Census data I’ve used in this post are from TableBuilder, which randomly adjusts some cells to avoid releasing confidential information. This means that if you generate tables on employment by income in the oil and gas industry, your figures may be slightly different to mine. The differences will not be large or meaningful.