Figure 1: Real increase in National Minimum Wage and parties’ positions in minimum wage reviews
Key points
As Australia’s minimum/average wage ratio has fallen, earnings inequality and the incidence of
Real increase over level at previous review 4% ACTU's claim
low pay have risen.
Countries with lower minimum/average wage
2%
ratios tend to have higher earnings inequality and Decision
incidence of low pay.
0%
The relatively egalitarian character of Australia’s labour market is threatened by further erosion of the minimum/average wage ratio.
Minimum wage increases do not necessarily reduce employment in theory, and much evidence suggests they have not in practice.
ACCI's position
-2%
The Commission decided to increase minimum
-4% 2000
2002
2004
2006
2008
2010
2012
2014
Source: ACTU calculations based on past FWC/AFPC/AIRC decisions and ACTU/ACCI submissions. Deflated by the CPI (ABS 6401). Assumes 2.9% inflation to the Sept 2014 quarter.
wages by 3%. The ACTU is concerned this won’t be enough to prevent further increases in
The good news for Australia is that real wages are
inequality.
higher than they were a decade or two decades ago,
The Fair Work Commission recently announced it will increase the National Minimum Wage (NMW) and all award minimum wages by 3%, from 1 July. This is lower than the increase sought by the ACTU, which
unlike in some OECD countries. The bad news is that this growth has been shared unequally, with wages growing much quicker at the top end than for lowpaid workers.
was $27 per week (4.3%) for the NMW and the lowest award wages and 3.7% for higher award rates.
The earnings of high-paid workers (those at the 90th percentile) grew by an average of 2.5% in inflation-
This Economic Bulletin sets out the reasons why the ACTU advocated a $4.3%/3.7% increase to minimum wages. The ACTU is concerned that if the minimum wage continues to fall relative to average wages then Australia’s labour market will continue to grow more unequal.
adjusted terms between 2002 and 2012; the median rose by 1.7% a year, while the NMW grew by 0.8% a year. There are many reasons for rising wage inequality, but the sharp fall in the minimum wage, relative to median and average wages, has surely played a role.
ACTU Economic Bulletin – June 2014 – Page 1
Figure 2: Real weekly earnings of full-time non-managerial employees in 1992, 2002 and 2012 Real 2012 dollars per week $2,500 $2,000
Figure 4: Minimum wage bite – NMW as a % of average/median Ratio 65% 60%
- 1992 - 2002
NMW as % of median
55%
- 2012 $1,500
50%
$1,000
45%
NMW as % of average
40%
$500
35% Mar 94
$0
Mar 99
Mar 04
Mar 09
Mar 14
Source: ABS 6302 (AWOTE), ABS 6310, ABS 6401, FWC.
A widely used way of comparing minimum wages over time and across countries is the ‘minimum wage
Source: ABS 6306, ABS 6401, ACTU calculations.
Figure 3: Average annual growth in real full-time nonmanagerial earnings: 2002 to 2012 90th percentile
2.5%
bite’. This is the minimum wage as a proportion of the average or median wage. In 2013, the NMW was 43.3% of average full-time earnings, the lowest ratio on record. This ratio has fallen steadily for the past
75th percentile
2.0%
50th percentile
two decades – it was 48.2% in 2003 and 55.2% in 1993. If average full-time earnings grow by more than
1.7%
3% in 2014, the minimum wage bite will fall again.
25th percentile 10th percentile NMW 0.0%
Figure 5: Real weekly minimum/average/median full-time earnings
1.4%
Real $ per week $1600
1.2%
Average full-time earnings
0.8% 0.5%
1.0%
1.5%
2.0%
2.5%
$1200
Source: ABS 6306, ABS 6401, ACTU calculations.
Average full-time earnings grew by 2.9% in 2013.
$800
Even though average wages growth was very slow, relative to its typical pace over the past couple of
National Minimum Wage
$400
decades, the minimum wage still didn’t keep up (rising by 2.6%). $0 Mar 94
Mar 99
Mar 04
Mar 09
Mar 14
Source: ABS 6302 (AWOTE), ABS 6310, ABS 6401, FWC.
The fall in low-paid workers’ relative earnings isn’t just due to some outlier industries (like mining and
ACTU Economic Bulletin – June 2014 – Page 2
utilities) experiencing rapid real wage growth and
wage bite was nearly 10 percentage points higher
dragging up the average. The minimum wage has
than the bite of any other OECD country. By 2002,
fallen relative to average wages even in the industries
our bite was still the largest in the OECD, but had
in which low-paid workers are concentrated – retail,
fallen quite a bit. Over the past decade, Australia has
hospitality, health care and social assistance, and
experienced the largest fall in the minimum wage
administrative and support services.
bite of any OECD country, and we are falling back to
Figure 6: NMW as a percentage of average full-time earnings in industries with large proportion of low-paid workers Per cent 70%
the middle of the pack, as shown in Figure 7.
Accommodation & Food Services
65%
The Australian minimum wage bite has declined during both economic booms and times of slower growth. It has declined under each of the three
60% Retail Trade
Administrative & Support Services
55%
institutions that have had responsibility for adjusting minimum wages over the past two decades.
50%
If these trends continue, in around four years our bite Health Care & Social Assistance
45%
will be the same as Canada’s current bite and in around five or six years it will be the same as the UK’s
40% 1993
1998
2003
2008
2013
Source: ABS 6302 (AWOTE); FWC.
current bite. In just two decades, if the trend continues, Australia’s minimum wage will be worth less than 30% of the average full-time wage, in the
While Australia’s minimum wage bite has been
vicinity of the present level in the United States. This
falling, that hasn’t been the case in most OECD
projection is shown in Figure 8.
advanced economies. In 1992, Australia’s minimum
Figure 7: Distribution of minimum wage bites in OECD countries
Source: OECD Stat and ACTU calculations. Chart shows the number of countries in 2.5 percentage point ranges. Bite=minimum FT wage as % of average.
ACTU Economic Bulletin – June 2014 – Page 3
Figure 8: Minimum wage bites in Australia, Canada, UK and USA, including projected Australian bite Minimum wage as % of average wage 60% Australia
Projection If past trends continue, we’ll be: -where Canada is now in 4 years; -where the UK is now in 5 years; and -where the US is now in 23 years.
50% 40%
Canada United Kingdom
30%
United States
20% 10% 0% 1990
Other OECD countries (excl.Mexico)
The US would be here with President Obama's proposed $US10.10 minimum wage
2000
2010
2020
2030
Source: OECD Stat and ACTU calculations. The projection assumes a 0.67 percentage point decline per year, the average since 1990.
Countries with lower minimum wage bites tend to have greater earnings inequality (Figure 9). They also
Figure 9: Minimum wage bite and 50:10 earnings ratio in 2010 50:10 ratio 2.2 US
tend to have a larger proportion of their workforce in low paid jobs – those that pay less than two-thirds of
2.0
Korea
the median full-time wage (Figure 10).
Slovak Rep
1.8
Sure enough, earnings inequality and the incidence of
Israel Ireland
UK Hungary Poland Australia Spain Turkey Netherlands Japan Slovenia Greece
1.6
Luxembourg
low pay have risen in Australia as our minimum wage bite has fallen (Figure 11). We’ve gone from having a
Canada
Estonia Czech Rep
NZ France
Portugal
1.4
Belgium
notably egalitarian earnings distribution to one that is middle-of-the-pack and increasingly unequal.
If Australia’s minimum wage keeps falling, relative to average wages, the consequences won’t be dire immediately. It will take a while to fully erode
1.2 25%
45%
55%
Minimum wage as a percentage of average Figure 10: Minimum wage bite and low-pay incidence in 2010 Low pay incidence (Per cent) 30
Australia’s status as a relatively high minimum wage
25
country with a relatively equal wages distribution.
20
US
Korea
Israel Hungary UK Czech Rep Slovak Rep Canada Ireland Poland Australia Spain Japan
But over time, if the current trends continue, Australia will start to resemble other advanced
35%
15
New Zealand
Greece
economies with a relatively low minimum wage and
10
high earnings inequality. We are already a fair way
5
Portugal Belgium
down this track. 0 25%
35% 45% Minimum wage as a percentage of average
Source: OECD Stat.
ACTU Economic Bulletin – June 2014 – Page 4
55%
Figure 11: The incidence of low pay and earnings inequality (the 50:10 ratio) over time in OECD countries
Source: OECD Stat
There’s a precedent for this kind of erosion – the
In a perfectly competitive labour market, the
United States. In 1968, the US minimum wage was
economics 101 model, individual firms face a
worth US$10.40 in 2013 prices. This is higher than the
horizontal (ie. infinitely elastic) labour supply curve.
Australian minimum wage today - the Australian
This means it’s assumed that firms can immediately
minimum wage (AU$16.37) is worth US$10.20 in
fill all vacancies by paying the prevailing market
purchasing power terms.
wage. If a firm expands its workforce, the market wage does not change, as each firm is too small to affect the market outcome. The model assumes employees face no costs of job search, have perfect
Contrary to what is learned in microeconomics 101 or in much press coverage, a minimum wage does not necessarily cost jobs. Employers have power in the labour market, which means they’re often able to get away with paying workers less than their marginal product.1 As a result, it’s possible for minimum wages to secure a fair wage for the low-paid without
information about all vacancies, and have identical preferences to one another. Competition among employers leads to a single wage for each type of worker (adjusted for non-financial benefits of the job). If any employer pays even slightly below the market wage, the firm will immediately lose all existing workers and will be unable to fill vacancies.2
harming employment. The predictions of the perfectly competitive model don’t fit with many empirically observed features of labour markets, such as: the existence of vacancies 1
throughout the business cycle; substantial differences
There are some models (eg. efficiency wages) in which a minimum wage set modestly above the market-clearing rate does not necessarily cause disemployment. There are also arguments that the optimal level of disemployment from a minimum wage may not be zero, if earnings effects are large and positive.
2
Bhaskar, V., Manning, A. and To, T. 2002, ‘Oligopsony and Monopsonistic Competition in Labor Markets’, Journal of Economic Perspectives, vol. 16, no. 2, Spring, pp. 155-174.
ACTU Economic Bulletin – June 2014 – Page 5
in wages across workers with similar characteristics
The ‘dynamic’ in dynamic monopsony models
and jobs; the differences in turnover between
indicates that the market power held by employers in
industries that pay high wages versus those that pay
such models stems from frictions in the labour
low wages; the fact that large firms tend to pay
market. An employer in a dynamic monopsony model
higher wages; the willingness of some employers to
need not be a monopolist in the product market, nor
pay for general training rather than only the
the sole purchaser of labour in the region or industry.
acquisition of firm-specific skills; the existence and
A single employer in a market with many employers
persistence of racial and gender pay gaps; and the
can have monopsonistic power if workers bear costs
repeated empirical observation that minimum wage
of job search.
increases do not necessarily reduce employment.3 Whereas a firm in a perfectly competitive market can Other models of the labour market have been
expand employment at the prevailing market wage,
developed that feature more realistic assumptions
ie. the labour supply curve to the firm is horizontal, a
and can explain these observed features of real-world
firm with monopsony power that wishes to expand
markets.
‘dynamic
its workforce and fill vacancies may need to pay a
In a model of this sort, the labour
higher wage than is paid to its existing workforce. If it
supply curve facing a firm slopes upwards (rather
offers the higher wage necessary to fill vacancies, it
than being horizontal as in the case of perfect
will need to increase the wage of existing employees.
competition). This can occur because of any number
In this case, the firm faces an upward sloping supply
of frictions, or deviations from the implausible
curve rather than the infinitely elastic, horizontal
assumptions of the perfectly competitive model.
supply curve envisaged by the perfectly competitive
Workers may not have perfect information about all
model, in which firms can hire an infinite number of
alternative positions and may therefore be cautious
additional employees at the prevailing wage. In a
in changing jobs. Job search may be costly. Workers
situation where firms have monopsony power and
and jobs may be mismatched geographically, and
face an upward sloping demand curve, their profit-
changing jobs may involve greater transport costs.
maximising level of employment and wages will both
Workers may not all have identical preferences
be lower than under perfect competition.
A
monopsony’.
widely-used
model
is
regarding jobs. These frictions can result in employers having market power, which they can
A minimum wage, in such a model, can increase both
exploit to pay workers less than the value of what
employment and earnings.
they produce.
set at or below the marginal product of labour,
If the minimum rate is
employment will not fall (and could rise) as a result of the imposition of the minimum rate. Monopsonistic models do not have an unambiguous prediction for 3
For further discussion see Zavodny, M. 1998, ‘Why Minimum Wage Hikes May Not Reduce Employment’, Economic Review, Federal Reserve Bank of Atlanta, pp. 19-20; and Bhaskar, et al. 2002.
the employment effects of a minimum wage. Bhaskar, et al. note that “a minimum wage set moderately above the market wage may have a
ACTU Economic Bulletin – June 2014 – Page 6
positive effect or a negative effect on employment, but the size of this effect will generally be small.”4
Figure 12: Distribution of estimated employment elasticities from 64 natural experiments in the US Density 2.0
1.5
Much
evidence
from
overseas
suggests
that
1.0
minimum wage rises haven’t reduced employment. The famous study by David Card and Alan Krueger in the 1990s compared fast food employment in New
0.5
Jersey and Pennsylvania after one state increased its minimum wage and the other didn’t.5 They didn’t find a significant effect on employment. More recent studies have extended this approach.
0.0 -1
0
1
2
Elasticity Source: Dube, Lester and Reich 2010.
These studies aren’t alone. A paper in the British Journal of Industrial Relations examined 1 494
A
landmark
paper
looked
at
US
restaurant
employment in 288 different pairs of counties that were next to one another, where the counties had different minimum wages.6
This approach is like
estimates of the employment effect of US minimum wage rises published in 64 different papers.8 They found that there was virtually no employment effect from minimum wage rises.
conducting dozens of Card-Krueger style natural experiments and pooling them together. They find that minimum wages are effective in boosting pay, but they don’t harm employment. Subsequent studies using similar methodology have reached similar findings.7
Similarly, in the UK, the evidence has been clear. When the UK first introduced a minimum wage in 1999, they initially took a cautious approach. The UK Low Pay Commission was worried about negative effect on employment. But those negative effects never became apparent.
The UK’s minimum wage is now 75% higher than it was when it was introduced, while the UK CPI has risen by just 37% over the same period. The UK Low 4
Ibid. 5 Card, D. and Krueger, A. 1994, ‘Minimum Wages and Employment: A Case Study of the new Jersey and Pensylvania Fast Food Industries’, American Economic Review, vol. 84, no. 4, pp. 772-793. 6 Dube, A., Lester, T.W. and Reich, M. 2010, ‘Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties’, The Review of Economics and Statistics, vol. 92, no. 4, pp.945-964. 7 See the summary in Dube, A. 2013, Statement before the US Senate Committee on Health, Education, Labor & Pensions Hearing on ‘Keeping up with a Changing Economy: Indexing the Minimum Wage’, March 14, p.11.
Pay Commission has now commissioned over 130 pieces of research from accomplished academic economists, the overwhelming majority of which find minimum wages boost workers’ pay, but don’t harm
8
Doucouliagos, H. and Stanley, T.D. 2009, ‘Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis’, British Journal of Industrial Relations, vol. 47, no. 2, pp.406-428.
ACTU Economic Bulletin – June 2014 – Page 7
Figure 13: Unemployment rate and minimum wage level in OECD countries in 2012
employment. For example, Draca, Machin and Van Reenen find “no significant effects on employment or productivity in any sector.” 9
Unemployment rate in 2012 (Per cent) Spain 25 Greece
In Australia, there’s less evidence about the effect of
20
minimum wages on employment. But some of the evidence that is available suggests that past increases
Portugal
15
haven’t cost jobs. A 2011 paper in the British Journal of Industrial Relations found no significant effect of Australian minimum wage rises on teenagers.10
Hungary Estonia Poland France Slovenia Turkey US UK Belgium Czech R Israel Canada NZ Chile Australia Nether Lux Austria Japan Korea
10
Mexico
5
Another paper looked at the effect of youth award rates and found no evidence that they reduce
Ireland
Slovak R
0 $0
employment.11 Research from academics at ANU
$2
$4 $6 $8 $10 Minimum wage in 2012 (USD PPP)
$12
suggests that the Australian employers have power in
Source: OECD Stat
the labour market and that the ‘dynamic monopsony’
There are, of course, many factors that affect the
model appears to fit the facts in Australia.12
level of employment and unemployment in a country, including monetary and fiscal policy. Minimum wages are far from the only factor. Nevertheless, it’s important to note that many countries (including
Although
Australia’s
minimum
wage
remains
somewhat high compared to those of most economies, our labour market performance has been strong. We have a lower rate of unemployment, and
Australia) that have relatively high minimum wages also
have
relatively
strong
labour
market
performance. This fact is often omitted from public debate about minimum wages.
higher employment-to-population ratio, than many
Figure 14: Employment-to-population ratio (aged 15-64) and minimum wage level in OECD countries in 2012
other advanced economies.
Employment-to-population ratio in 2012 (Per cent) 80 9
Draca, M., Machin, S. and Van Reenen, J. 2011, ‘Minimum Wages and Firm Profitability’, American Economic Journal: Applied Economics, vol. 3, no. 1, pp.129-151. 10 Lee, W-S. and Suardi, S. 2011, ‘Minimum Wages and Employment: Reconsidering the Use of a Time Series Approach as an Evaluation Tool’, British Journal of Industrial Relations, vol.49, no.S2, pp. 376-s401. 11 Olssen, A. 2011, ‘The Short-Run Effects of Age-Based Youth Minimum Wages in Australia: A Regression Discontinuity Approach’, Paper presented at New Zealand Association of Economists Annual Conference, Wellington, 29 June-1 July 2011. Paper available from: http://www.motu.org.nz/publications/detail/the_shortrun_effects_of_age_based_youth_minimum_wages_in_australia _a_regre [Accessed 11 March 2014]. 12 Booth, A.L. and Katic, P. 2010, ‘Estimating the Wage Elasticity of Labour Supply to a Firm: What Evidence is there for Monopsony?’, CAMA Working Paper 35/2010, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, Australian National University, Canberra.
Nether
75 NZ Austria Canada Japan UK
70 Estonia Czech R
65
60
Israel
Korea Portugal Chile Mexico
Slovak R Poland
Australia
US Slovenia
Lux France Belgium Ireland
Hungary Spain
55 $0
$2
$4 $6 $8 $10 Minimum wage in 2012 (USD PPP)
Source: OECD Stat
ACTU Economic Bulletin – June 2014 – Page 8
$12
The relationship (or more aptly the lack of a significant relationship) between minimum wages
Figure 15: Responses by economists to the statement “raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment”
and employment or unemployment depicted in
60%
Figure 13 and Figure 14 remains much the same if the
50%
minimum wage bite is used rather than the minimum
40%
wage in purchasing power terms. Similarly, when the change in the minimum wage (in either PPP or bite
30%
terms) is compared to the change in the employment
20%
or unemployment rates, the relationship is weak and
10%
runs in the opposite direction to the one that is typically assumed in public commentary. High
0% Strongly Agree
minimum wages are not incompatible with high levels
of
employment
and
low
levels
of
unemployment.
Agree
Uncertain Disagree
Strongly Disagree
Source: IGM Booth School of Business, University of Chicago 2013. Responses weighted by each expert’s confidence.
Figure 16: Responses by economists to the statement “the distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy” 60%
The Booth School of Business at the University of
50%
Chicago periodically surveys a panel of high profile
40%
economists at top US universities regarding their
30%
views on various matters of public policy. The panel consists of accomplished, senior faculty members of elite research universities, including winners of the Nobel Prize and John Bates Clark Medal. It is diverse politically, geographically, and in terms of the respondents’ age. 13
20% 10% 0% Strongly Agree
Agree
Uncertain Disagree
Strongly Disagree
Source: IGM Booth School of Business, University of Chicago 2013. Responses weighted by each expert’s confidence.
The panel of economists were recently asked their views about minimum wages. They were asked to respond to two questions, as shown in Figure 15 and Figure 16Error! Reference source not found.. Both questions pertained to a proposed increase in the US federal minimum wage from $US7.25 to $US9 per hour – a 24.1% nominal increase. Recall that the 13
IGM Booth School of Business 2014, ‘Economic Experts Panel’, University of Chicago. Available from: http://www.igmchicago.org/igm-economic-experts-panel [Accessed 18 March 2014]
Australian minimum wage is currently worth US$10.20 in purchasing power terms.
ACTU Economic Bulletin – June 2014 – Page 9
The economists were more or less evenly divided on the question of whether this increase would make it
The proposed increase to which these eminent
noticeably harder for low-skilled workers to find
economists have lent their support would see the US
employment. A plurality (47%) agreed that this would
federal minimum wage rise by 39.3% in nominal
be a desirable policy. Only 11% disagreed. When
terms. This would take it very close to the Australian
weighted by their confidence, 62% agreed or strongly
NMW in purchasing power terms.
agreed that a 24.1% nominal increase and indexation to inflation would be desirable, while 16% disagreed or strongly disagreed. This is a remarkable level of support for a fairly large (24.1%) increase in the US minimum wage.
Many economists support a substantial increase in the US minimum wage, to lift the US rate close to Australia’s. This reflects the substantial advances in both theory and evidence about the functioning of labour markets and the welfare-enhancing potential
In January this year, an open letter from over 600
of fair minimum wages.
economists to US Congressional leaders in support of a $US10.10 minimum wage was released.14 The signatories include seven Nobel laureates (Arrow; Diamond; Maskin; Schelling; Solow; Spence; and Stiglitz) and a number of past Presidents of the
A decent minimum wage remains a cornerstone of Australia’s system of social protection. If the minimum wage keeps falling, relative to average wages, earnings inequality is likely to continue to rise.
American Economic Association.15
Australia’s labour market will soon resemble those of The letter states that a $10.10 minimum “would
the UK and Canada if past trends continue. The 3%
provide higher wages for close to 17 million workers”
increase in minimum wages in 2014 is unlikely to be
and indirectly benefit another 11 million. The
enough to stop the minimum wage bite falling again.
economists note that: In
recent
years
there
have
been
important
developments in the academic literature on the effect
Please
send
any
comments,
corrections,
criticisms
compliments to Matt Cowgill at mcowgill@actu.org.au.
of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labo[u]r market. 14
‘Economists’ Statement on the Federal Minimum Wage’, Economic Policy Institute. Available from: http://www.epi.org/minimum-wage-statement/. [Accessed 14 March 2014]. 15 A rival letter was organised by the National Restaurant Association, although the involvement of that Association was not known to some signatories and was not initially disclosed when the letter was made public.
ACTU Economic Bulletin – June 2014 – Page 10
or
The tables and charts below summarise the latest
Figure 18: Change in employment in the year to May Thousands 120
available data about the Australian labour market.
100
98.7
Table 1: Summary of labour force figures Level
Monthly change
Yearended change
Employed persons
11,564,600
-4,800
98,700
- Full time employment
8,068,300
22,200
49,700
- Part time employment
3,496,200
-27,000
49,000
Working age population
19,013,300
29,900
339,800
80 65.7 60
49.7
40 20
35.0
30.7 19.0
60.8%
-0.1 ppts
-0.6 ppts
Unemployment rate
5.8%
0.0 ppts
0.3 ppts
Unemployed persons
717,100
3,200
44,000
64.6%
-0.1 ppts
-0.4 ppts
33.0
14.0
0 Full time Males
Employment-topopulation ratio
49.0
Part time Females
Total Total
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
Figure 19: Unemployment rate Per cent 6.5 6.0
Participation rate
5.5 Underemployment rate (quarterly)
7.6
0.2 ppts
0.3 ppts
5.0
Source: ABS 6202, seasonally adjusted.
Figure 17: Change in employment between April and May 2014 Thousands 30 22.2 20 10
4.5 4.0 3.5
16.3 3.0 May 04
8.3
5.9
Seasonally adjusted May 06
May 08
May 10
Trend May 12
May 14
Source: ABS 6202.
0 -10
-4.8
-8.0 -13.1
-20
Figure 20: Employment to population ratio (15+) Per cent 64 63
-19.0
-30 Full time Males
-27.0 Part time Females Total
62 Total 61
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
60 59 58 May 04
May 06
Source: ABS 6202.
ACTU Economic Bulletin – June 2014 – Page 11
May 08
May 10
May 12
May 14
Figure 21: Unemployment rates by state/territory
Figure 24: Employment growth in the year to May 2013
7.8 7.5
Tas
Other Services Health Care & Social Assistance
6.1 6.7
SA Vic
5.7 6.3
Qld
5.9 6.3
4.0 3.7
ACT
May 2013
5.6
NT 0
2
33.4
Rental, Hiring & Real Estate…
4.9 5.1
WA
43.2
Agriculture, Forestry & Fishing
5.5 5.5
NSW
46.8
3.3
May 2014
4 6 Per cent
8
25.7
Education & Training
22.3
Manufacturing
19.1
Construction
14.1
Retail Trade
12.4
Professional, Scientific &…
9.6
Electricity, Gas, Water & Waste…
4.6
Mining
4.0
Administrative & Support…
10
0.6
Transport, Postal &…
-6.1
Source: ABS 6202, trend.
Figure 22: Participation rate 15+ (%) 66.0
15-64 (%) 77.0 76.5
65.5
76.0
65.0
75.5
64.5
Financial & Insurance Services
-9.1
Public Administration & Safety
-9.3
Information Media &…
-9.8
Arts & Recreation Services
-15.8
Accommodation & Food Services
-33.3
Wholesale Trade
-51.1
-60 -40 -20 0 20 Thousands Source: ACTU calculations based on ABS 6202, trend.
75.0
64.0
74.5
63.5
74.0 May 04
15-64 (LHS) May 06
May 08
15+ (RHS) May 10
May 12
63.0 May 14
Source: ABS 6202.
Figure 23: Underemployment and unemployment rates Per cent 14 12 10 Underemployment 8 6 4 Unemployment
2 0 May 09
May 10
May 11
May 12
May 13
May 14
Source: ABS 6202, trend.
ACTU Economic Bulletin – June 2014 – Page 12
40
60
Figure 27: Annual growth in labour productivity (GDP per hour) Table 2: Summary of September quarter National Accounts
Level
Quarterly change
Yearended change
Quarterly real GDP
394929
1.1%
3.5%
Real GDP per capita
16858
0.7%
1.8%
Labour productivity (total economy)
-
0.2%
2.1%
Labour productivity in the market sector
-
1.0%
2.7%
Terms of trade
-
-1.2%
-3.9%
Wages share of income
53.0%
-0.2
-0.9
Profits share of income
27.4%
0.0
0.9
Year-ended growth 5% Fair Work Act
Work Choices
4% 3% 2% 1% 0% -1%
Seasonally adjusted
Source: ABS 5206.
-2% Mar 04
Mar 06
Mar 08
Mar 10
Mining
6%
8.2%
Construction
5% 20-year average, 3.3%
7.5%
Rental, hiring and real estate…
7.2%
Health care and social…
5.1%
Arts and recreation services
3.9%
Public administration and…
3%
3.8%
Agriculture, forestry and fishing
3.6%
Administrative and support…
2%
Mar 06
Mar 08
Trend
Mar 10
Mar 12
Mar 14
2.2%
Retail trade
1.8%
Information media and…
0.9%
Accommodation and food…
0.7%
Other services Wholesale trade
Source: ABS 5206 and ACTU calculations.
Figure 26: Annual growth in nominal unit labour costs 8%
Transport, postal and…
-3.4%
6%
-15% Source: ABS 5206.
2%
0%
-2% Mar 94
Seasonally adjusted Trend Mar 98
Mar 02
Mar 06
Mar 10
-1.6% -2.2%
Professional, scientific and…
4%
0.4%
Electricity, gas, water and…
Manufacturing
20-year average, 2.5%
2.8%
Education and training
1% 0% Mar 04
Mar 14
14.1%
Financial and insurance…
Seasonally adjusted
Mar 12
Source: ABS 5206.
Figure 28: Growth in output (gross value added) – year to March 2013
Figure 25: Growth in real GDP per year
4%
Trend
Mar 14
Source: ABS 5206 and ACTU calculations. Non-farm.
ACTU Economic Bulletin – June 2014 – Page 13
-3.6% -4.2% -5% 5% 15% Annual GVA growth
25%
Figure 30: Headline and underlying CPI inflation Per cent 5%
Table 3: Summary of prices and wages data Annual Latest growth quarter rate Wage Price Index (WPI)
March
4%
2.6% 3%
Full-time average weekly ordinary time earnings (AWOTE)
November
Real full-time AWOTE
November
0.2%
Total average weekly earnings (AWE)
November
3.0%
July
2.6%
0% Mar 04
Headline CPI
March
2.9%
Source: ABS 6401.
Underlying CPI (trimmed mean)
March
2.6%
Employees’ cost of living (LCI)
March
2.1%
November
-0.5ppts
2%
RBA's target band
1%
National Minimum Wage
Gender pay gap
2.9%
Headline CPI Underlying CPI Mar 06
Mar 08
Mar 10
Mar 12
Mar 14
Figure 31: Wage Price Index growth 4.5%
4.0%
Source: ABS 6345, ABS 6302, FWC, ABS 6401, ABS 6467, ACTU calculations.
3.5%
Figure 29: Annual growth in the CPI and workers’ cost of living (Employee LCI)
3.0%
Long-run average
2.5%
6%
Trend
5% 2.0% Sep 98
4%
Sep 03
Seasonally adjusted Sep 08
Sep 13
Source: ABS 6345.
3% Figure 32: WPI growth in the public and private sectors 2% 1% 0% -1% Mar 04
5.0% Underlying CPI 4.5%
Employee LCI
4.0% Mar 06
Source: ABS 6467, ABS 6401.
Mar 08
Mar 10
Mar 12
Mar 14 3.5% 3.0% 2.5%
Private Public
2.0% Mar 04
Mar 06
Source: ABS 6345.
ACTU Economic Bulletin – June 2014 – Page 14
Mar 08
Mar 10
Mar 12
Mar 14
Figure 33: WPI growth in the year to March by industry 0% 1% 2% 3% 4% Arts and recreation services
Figure 36: Average weekly ordinary time earnings for full-time adults $0 $1,000 $2,000
3.3%
Electricity, gas, water and…
Mining
3.3%
Construction
3.2%
Education and training
3.2%
Manufacturing
3.1%
Public administration and…
2.9%
Rental, hiring and real…
2.8%
Financial and insurance…
2.8%
Australia
$1,672.00
Financial and Insurance…
$1,649.40
Public Administration… Education and Training
2.6%
Transport, postal and…
$1,450.50 $1,437.00
Wholesale Trade
2.4%
Retail trade
2.4%
Mining
2.4%
Wholesale trade
2.3%
Rental, Hiring and Real…
Accommodation and food…
2.3%
Administrative and…
Administrative and…
2.3%
$1,390.50 $1,387.10
Health Care and Social…
$1,368.10
Arts and Recreation…
$1,321.00
Manufacturing
Other Services
2.2%
Accommodation and…
1.9%
Retail Trade
Source: ABS 6345.
$1,519.70
Construction
Retail trade
Other services
$1,619.90 $1,534.90
All Industries Transport, Postal and…
2.6%
Professional, scientific and…
$1,730.70
Information Media and… Electricity, Gas, Water…
3.0%
Health care and social…
$2,469.60
Professional, Scientific…
$1,290.60 $1,286.90 $1,281.60 $1,103.20 $1,048.40 $1,031.80
Source: ABS 6302.
Figure 34: Range of WPI growth rates across industries 7% Figure 37: Average annualised wage increase in federal enterprise agreements Per cent 5.5
6% 5% 4%
5.0
Agreements lodged in quarter
3% 4.5 2% 4.0
Range of growth rates in all industries
1%
Australia 0% Mar 04
Mar 06
Mar 08
All current agreements
3.5 Mar 10
Mar 12
Mar 14 3.0
Source: ABS 6345 and ACTU calculations.
Figure 35: WPI growth in the year to March by state 0% 1% 2% 3% 4% SA
3.2%
NT
2.8%
Victoria
2.7%
WA
2.6%
NSW
2.6%
Australia
2.6%
Qld
2.6%
Tas
2.3%
ACT
2.3%
2.5 2.0 Dec 93
Dec 98
Dec 03
Dec 08
Dec 13
Source: Department of Employment, Trends in Federal Enterprise Bargaining. )
Source: ABS 6345.
ACTU Economic Bulletin – June 2014 – Page 15