Archives for posts with tag: wages

Have real wages in Australia grown faster than labour productivity?

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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.

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The campaign by The Australian newspaper against the Fair Work Act has had a few phases. I’d like to go through a few of their key claims and evaluate them against recent data.

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How would we know if we were having a wages breakout? Back in the 70s, there was a period in which wages rose faster than productivity, leaving a situation that some economists dubbed a “real wage overhang”. This, I believe, is what people are talking about when they warn of a “breakout” – an inflationary burst of wages growth well in excess of productivity growth. In fact, since around the turn of the century, we’ve experienced the opposite phenomenon in Australia. Wages haven’t kept pace with labour productivity. They’ve “decoupled”.

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Today, Barack Obama announced his intention to push for the US federal minimum wage to be lifted to $9 per hour by 2015, and then indexed to inflation.

In case anyone is interested in how the Australian minimum wage[fn1] stacks up against other advanced economies, I thought I’d post a few charts. As at February 2012, the National Minimum Wage is $15.96 per hour, which works out to $606.40 per week for full-timers. The rate is higher if you’re a casual employee (and therefore don’t accrue paid annual leave and sick leave). To find the minimum wage that applies in a particular circumstance, try the Fair Work Ombudsman.

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