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Open Letter on the Benefits of Promoting Faster Wage Growth

by Jim Stanford on March 20, 2019
Events

Signed by 124 Labour Market, Employment Relations and Labour Law Researchers

For the last several years, Australian wages have experienced an unprecedented slowdown. Nominal wages have been growing at only about 2% per year since 2015. That’s barely half the traditional pace of growth experienced over the preceding 50 years – and the slowest sustained rate of wage growth since the end of the Second World War. Nominal wages have barely kept up with consumer prices; for many Australian workers, the real purchasing power of their incomes has declined. This has occurred despite official labour market indicators (such as employment growth and the unemployment rate) that seem, on the surface, relatively healthy. And despite official assurances that an acceleration of wage growth is imminent, there is no clear indication of any significant or lasting rebound. The most commonly-reported wage measure (the ABS’s Wage Price Index) actually showed a slight slowing of wage growth in the December quarter; other measures also indicate continued weakness.

The consequences of this unusually slow wage growth are many and varied, and include: weaker consumer spending, greater household indebtedness and financial stress, slower growth in government revenues, and widening inequality. In our judgment, the deceleration of wage growth is due in significant part to the impact of deep structural and institutional change, and cannot be explained as a normal outcome of market forces. These structural and institutional factors include wage suppression by governments (affecting not just the public sector, but businesses or non-profit organisations reliant on public funding or procurement), the erosion of collective bargaining, the expansion of precarious for of employment (including independent contracting, temporary work, labour hire and gig work), and so-called “wage theft”. These are not the only reasons for the slowdown in wages, but they are important ones.

An important public conversation has been sparked in Australia regarding how to address and reverse wage stagnation. In our judgment, waiting for market forces to restore normal wage trajectories is not likely to be effective. Instead, reversing the stagnation of wages will require positive policy action to strengthen institutional supports for higher wages.

Indeed, various proposals have been recently advanced to strengthen those wage supporting institutions and policies: including measures to raise (and better enforce) minimum wages, strengthen collective bargaining, relax wage caps on public sector workers, and constrain the ability of businesses to avoid or outsource normal employment responsibilities. If those proposals are implemented, in whole or in part, we expect they would support a moderate but meaningful improvement in wage growth in future years, lifting wage increases back above consumer price inflation and towards traditional benchmarks (of 3.5-4% per year). This in turn would have positive impacts on consumer spending, aggregate demand, economic growth, fiscal balances, and equality. Policy statements from bodies such as the Reserve Bank of Australia, the Treasury, and others also indicate the positive value of faster wage growth. And while any individual employer may think it benefits from lower (not higher) wages, collectively even the business community has a stake in the stronger purchasing power and community cohesiveness that comes with rising wages.

Some analysts and organisations have expressed concern and even alarm about the prospect of a recovery in wage growth, suggesting this would constitute a threat to Australia’s economic stability and success. We find these arguments puzzling and unconvincing. There is a growing consensus among labour market analysts and practitioners that wages today in Australia are too low, not too high. Hence Australia’s economic prospects would be enhanced by policies to boost wage growth. We believe that stronger wages in the future would contribute to a stronger, more balanced and fairer Australian economy.

Letter initiated by

Prof. Andrew Stewart, John Bray Professor of Law, Adelaide Law School

Dr. Jim Stanford, Economist and Director, Centre for Future Work

Dr. Tess Hardy, Senior Lecturer and Co-Director Centre for Employment and Labour Relations Law, University of Melbourne

Signatories to Public Letter On the Benefits of Promoting Faster Wage Growth

  1. Dr George Argyrous, Senior Lecturer, University of New South Wales
  2. Prof Christopher Arup, Adjunct Professor Business Law Department, Monash University
  3. Prof Tony Aspromourgos, Economist University of Sydney
  4. Prof Greg Bamber, Professor, Co-Director, International, Consortium for Research in Employment and Work (iCREW), Centre for Global Business, Monash Business School
  5. Dr Larissa Bamberry, Senior Lecturer, School of Management and Marketing, Faculty of Business, Justice and Behavioural Sciences, Charles Sturt University
  6. Dr Tom Barnes, Senior Research Fellow, Institute for Religion, Politics & Society, Australian Catholic University
  7. Dr Tim Battin, Senior Lecturer, University of New England
  8. Dr Michael Beggs, Senior Lecturer in Political Economy, University of Sydney
  9. Dr Laurie Berg Senior Lecturer University of Technology Sydney
  10. Dr Alysia Blackham, Associate Professor Melbourne Law School, University of Melbourne
  11. Prof Paul Boreham, Emeritus Professor Institute for Social Science Research, University of Queensland
  12. Josh Bornstein, Principal Lawyer, Maurice Blackburn
  13. Prof Mark Bray, Professor of Employment Studies, Newcastle Business School, University of Newcastle
  14. Prof Cathy Brigden Professor RMIT University
  15. Dr Gareth Bryant, Lecturer, Department of Political Economy, University of Sydney
  16. Prof John Buchanan, Chair of Discipline Business Analytics, Business School, University of Sydney
  17. Renee Burns, Executive Director, Australian Institute of Employment Rights
  18. Dr Iain Campbell, University of Melbourne
  19. Rod Campbell, Research Director, The Australia Institute
  20. Prof Anna Chapman, Associate Dean, (JD), Melbourne Law School, University of Melbourne
  21. Prof Sara Charlesworth, RMIT Distinguished Professor, Professor of Gender, Work & Regulation / Deputy Head of School Research & Innovation, School of Management, Centre for People, Organisation & Work (CPOW), RMIT University
  22. Dr Lynne Chester, Associate Professor, University of Sydney
  23. Prof Anis (Anisuzzaman) Chowdhury, Adjunct Professor, University of New South Wales and Western Sydney University
  24. Assoc Prof Linda Colley, Discipline Leader, HRM, School of Business and Law, CQ University
  25. Dr Joe Collins, Academic Fellow in Political Economy, University of Sydney
  26. Dr Natasha Cortis, Senior Research Fellow, Social Policy Research Centre, University of New South Wales
  27. Dr Peter Davidson, Senior Adviser Australian Council of Social Service
  28. Emma Dawson, Executive Director Per Capita
  29. Dr Richard Denniss, Chief Economist, The Australia Institute
  30. Dr Corrado Di Guilmi, Senior Lecturer, Economics Discipline Group, University of Technology Sydney
  31. Prof Robert Dixon, Honorary Professor, Department of Economics, University of Melbourne
  32. Dr Geoff Dow, Associate Professor School of Political Science, University of Queensland
  33. Prof Bradon Ellem, Professor of Employment Relations, Work and Organisational Studies, The University of Sydney Business School
  34. Dr John Falzon, Senior Fellow, Inequality and Social Justice, Per Capita
  35. Prof Karen Fisher Professor, Disability Research Program Social Policy Research Centre, University of New South Wales
  36. Dr Frances Flanagan, University of Sydney Fellow Work and Organisational Studies, University of Sydney
  37. Prof Anthony Forsyth Professor, Graduate School of Business & Law, RMIT University
  38. Prof Beth Gaze, Professor, University of Melbourne Law School
  39. Dr Gabrielle Golding Lecturer Adelaide Law School, University of Adelaide
  40. Dr Caleb Goods, Lecturer, Department of Management & Organisations, UWA Business School , University of Western Australia
  41. Prof Roy Green, Emeritus Professor, Innovation Adviser, University of Technology Sydney
  42. Egbert Groen, Sessional Lecturer. Newcastle Law School, University of Newcastle
  43. Matt Grudnoff, Economist, The Australia Institute
  44. Prof GC Harcourt Professor Emeritus University of New South Wales
  45. Dr Tess Hardy, Senior Lecturer and Co-Director, Centre for Employment and Labour Relations Law, University of Melbourne
  46. Peter Harkness, Former Senior Lecturer, Economics and Business, Swinburne University
  47. Troy Henderson, Economist, Centre for Future Work at The Australia Institute
  48. Prof John Howe, Director Melbourne School of Government, University of Melbourne
  49. Dr Joanna Howe, Associate Professor in Law, University of Adelaide
  50. Dr Elizabeth Humphrys, Social Scientist, Social and Political Sciences, University of Technology Sydney
  51. Dr Boyd Hunter, Associate Professor, Australian National University
  52. Russell Jackson, RJ Industrial Services
  53. Prof Richard Johnstone, Professor, School of Law, Queensland University of Technology
  54. Dr Evan Jones, Economist, Department of Political Economy, University of Sydney
  55. Prof P.N. Raja Junankar, Adjunct Professor, Industrial Relations Research Centre, University of NSW
  56. Dr Anne Junor, Honorary Associate, Professor, University of NSW
  57. Dr Sarah Kaine, Associate Professor, Research Director: Future of Work, Organising and Enterprise, Centre for Business and Social Innovation (CBSI), University of Technology Sydney
  58. Prof Steve Keen, Honorary Professor, University College London and ISRS Distinguished Research Fellow
  59. Nicholas Kimberley, Australian Catholic University
  60. Prof John King, Emeritus Professor, La Trobe University and Federation University
  61. Dr Peter Kriesler, Associate Professor School of Economics, University of New South Wales
  62. Damian Kyloh, Associate Director of Economic and Social Policy, Australian Council of Trade Unions
  63. Ingrid Landau, Lecturer, Department of Business Law & Taxation, Monash Business School, Monash University
  64. Prof Russell Lansbury, Emeritus Professor, University of Sydney Business School
  65. Dr Stephane Le Queux, Senior Lecturer in Employment Relations, James Cook University
  66. Tim Lyons, Research Fellow Per Capita
  67. Dr Fiona Macdonald, Senior Research Fellow, RMIT University
  68. Prof Johanna Macneil, Professor Employment Relations/HRM Discipline, Newcastle Business School, University of Newcastle
  69. Prof Raymond Markey, Emeritus Professor of Employment Relations, Faculty of Business and Economics, Macquarie University
  70. Prof Robert Marks, Professor Emeritus Economics, University of NSW
  71. Dr Shelley Marshall Vice Chancellor’s Senior Research Fellow, RMIT University
  72. Prof Greg Marston Professor of Social Policy, Head of School School of Social Science, University of Queensland
  73. Alison McClelland AM, Social Policy Consultant
  74. Dr Shae McCrystal, Professor, Professor of Labour Law; Deputy Dean and Deputy Head of School, University of Sydney Law School
  75. Prof Paula McDonald, Professor of Work and Organisation QUT Business School, Queensland, University of Technology
  76. Dr Ian McGregor, Lecturer Department of Management – UTS, Business School, Unversity of Technology Sydney
  77. Dr Margaret McKenzie, Economist, Australian Council of Trade Unions and Federation University
  78. Dr Gabrielle Meagher, Professor Department of Sociology, Macquarie University
  79. Dr Alex Millmow, Associate Professor in Economics, Federation Business School
  80. Prof Richard Mitchell, Professor in Labour Law Monash University
  81. Dr Cameron Murray, Visiting Scholar University of Sydney
  82. Dr Terri Mylett, Lecturer in HRM/Industrial Relations School of Business, Western Sydney University
  83. Dr Matt Nichol, Lecturer, Department of Business Law & Taxation, Monash Business School, Monash University
  84. Anthony O’Donnell, Senior Lecturer, School of Law, La Trobe University
  85. Prof Rod O’Donnell, Economist, University of Technology Sydney
  86. Dr Patrick O’Leary, Lecturer Federation Business School, Federation University
  87. Dr Alice Orchiston, Lecturer, University of New South Wales
  88. Adriana Orifici, Lecturer Monash Business School, Monash University
  89. Prof David Peetz, Employment Relations Griffith University
  90. Dr Michael Pegg, Industrial Relations Consultant
  91. Alison Pennington, Economist Centre for Future Work at The Australia Institute
  92. Prof Alison Preston, University of Western Australia
  93. Prof John Quiggin, ARC Australian Laureate Fellow School of Economics, University of Queensland
  94. Dr Patricia Ranald, Convener Australian Fair Trade and Investment Network
  95. Dr Michael Rawling, Senior Lecturer Faculty of Law, University of Technology Sydney
  96. Prof Alexander Reilly, Director Public Law and Policy Research Unit, Adelaide Law School, University of Adelaide
  97. Dr Susan Ressia, Lecturer Department of Employment Relations and Human Resources, Griffith University
  98. David Richardson, Senior Research Fellow, The Australia Institute
  99. Dr Stuart Rosewarne, Honorary Associate Professor Department of Political Economy, University of Sydney
  100. Dr Peter Ross, Honorary Senior Lecturer School of Humanities and Languages, University of New South Wales
  101. Dr Kerrie Saville, Senior Lecturer Department of Management, Faculty of Business & Law, Deakin University
  102. Dr Robyn Seth-Purdie, Senior Analyst, Prevention and Equity, UnitingCare Australia
  103. Prof Rhonda Sharp, Emeritus Professor AM University of South Australia
  104. Dr Christopher Sheil, Senior Fellow, School of Humanities and Languages, Faculty of Arts and Social Sciences, University of New South Wales
  105. Prof Peter Sheldon, Director, Industrial Relations Research Centre Business School, University of New South Wales
  106. Assoc Prof Meg Smith, Deputy Dean School of Business, Western Sydney University
  107. Warwick Smith, Senior Economist Per Capita
  108. Tilly South, Director Interns Australia
  109. Assoc Prof Ben Spies-Butcher Head, Department of Sociology, Macquarie University
  110. Prof John Spoehr, Director Australian Industrial Transformation Institute, Flinders Business School
  111. Dr Jim Stanford, Economist Centre for Future Work at The Australia Institute
  112. Prof Andrew Stewart, John Bray Professor of Law, Adelaide Law School, University of Adelaide
  113. Prof Frank Stilwell, Professor Emeritus in Political Economy University of Sydney
  114. Dr Tony Stokes, Greenacre Educational Publications
  115. Prof Carolyn Sutherland Director, Labour, Equality and Human Rights Research Group (LEAH),  Department of Business Law & Taxation, Monash Business School, Monash University
  116. Dr Helen Szoke, Chief Executive, Oxfam Australia
  117. Prof Joo-Cheong, Tham Professor Melbourne Law School, University of Melbourne
  118. Assoc Prof Louise Thornthwaite, Deputy Director Centre for Workforce Futures, Macquarie University
  119. Dr Trish Todd, Honorary Senior Research Fellow, University of Western Australia
  120. Dr Phillip Toner, Senior Research Fellow, Department of Political Economy, University of Sydney
  121. Dr Gerry Treuren, Senior Lecturer School of Management, University of South Australia
  122. Prof Beth Webster Pro Vice Chancellor (Research Policy and Impact), Director, Centre for Transformative Innovation,  Swinburne University of Technology
  123. Prof Eileen Willis, Emeritus Professor, Flinders University, College of Nursing and Health Sciences, Discipline of Health & Exercise Sciences
  124. Dr Shaun Wilson, Associate Professor, Macquarie University
Jim Stanford
Jim Stanford is a Canadian economist, recently arrived in Sydney. He worked for over 20 years as economist for the Canadian Auto Workers union (and its successor organization, Unifor), and is the author of Economics for Everyone: A Short Introduction to the Economics of Capitalism (second edition published in 2015 by Pluto Books in the U.K.). Jim now works for the Australia Institute, as Economist and Director of its new project, the Centre for Future Work. He is also an Honorary Professor in the Department of Political Economy at the University of Sydney.

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