Low wage growth emphasises need for new focus

Low wage growth emphasises need for government to focus on wages

The low wage increases for the year to March 2010 mean that real wages (after inflation) fell or little more than stood still. Workers will be concerned that the increase of 1.5 percent in the Labour Cost Index (LCI) for the year was significantly behind inflation of 2.0 percent, said CTU Economist and Policy Director Bill Rosenberg.

“It is all very well for the Government to say it has a target of 2025 to catch up with Australian wages but how about a target for 2011 or 2012?” said Rosenberg. “The reality is that we are drifting further behind Australian wages. Meanwhile the Government is reducing employment rights on such matters as dismissal appeal rights, meal breaks, holidays and accident compensation entitlements. This is the wrong approach. Employers and the Government need to focus on investment in decent jobs and policies that lift wages – such as a higher minimum wage.”

Australian average weekly earnings rose 5.0 percent in the year to November 2009 (latest available). New Zealand average weekly earnings rose 4.5 percent in the year to December and 2.5 percent in the March 2010 year. Australia’s Wage Price Index rose 2.9 percent in the year to December 2009 (latest available). New Zealand’s LCI rose 1.8 percent in the same period and 1.5 percent in the year to March 2010.

The LCI rose only 1.5 percent in the year, the lowest increase since September 2000, and a steep fall from the peak of 4.0 percent in September 2008. The LCI measures changes in pay rates for a fixed quantity and quality of labour. Average hourly earnings rose 2.1 percent in the year, the smallest annual increase since December 2004. This compares with inflation at 2.0 percent in the same period. However they actually fell in the March quarter for the second consecutive quarter – by 0.4 percent. Average ordinary time hourly earnings are now $25.27.

The proportion of workers experiencing an increase in the year has also fallen to only 43 percent – down from 60 percent a year ago and a peak of 62 percent in September 2008. The biggest drivers for increases were collective employment agreements and the cost of living. For those who got an increase, the median increase was 3.3 percent, and the average was 3.8 percent, indicating inequality in the distribution of increases.

Employment is no longer falling as fast as in 2009, with the number of filled jobs remaining at a very similar level to December. The big question is whether this is enough to keep up with the number of people entering the workforce in order to head off increased unemployment.

Total paid hours increased 1.1 percent in the March 2010 quarter (seasonally adjusted) assisted by the revival in manufacturing. Average paid hours worked per week increased 0.7 percent in the quarter, which meant average weekly earnings rose by 0.4 percent when both wage rates and hours worked are taken into account. Most of this increase is however due to seasonal effects.

ENDS

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