Economic Bulletin November 2014
Real wage cuts, not a ‘breakout’, for workers Key points
Figure 1: Year-ended growth in the Wage Price Index
Growth in the Wage Price Index has been the
4.5%
slowest in its 17-year history. 4.0%
Wages growth has slowed in all industries.
Other measures of wages growth are also slow.
With
wages
productivity
growth growth
relatively strong,
the
slow cost
3.5%
and of
3.0%
employing workers to produce a given amount of output has been growing at a slow pace.
2.5%
The slowing in wages growth reflects a weaker labour market, with higher unemployment and
2.0% Sep 98
slower employment growth.
Source: ABS 6345, seasonally adjusted.
Sep 03
Sep 08
Sep 13
Figure 2: Annual growth in wages and inflation
The Australian warned in a 2010 editorial that the
6%
Australian economy was “facing an economically irrational assault on a scale we have not witnessed for a quarter of a century” in the form of a “wages
5%
WPI growth CPI inflation (excluding effect of GST)
4%
breakout.” Others have issued similar warnings about unsustainable wages growth in Australia, such as Minister Abetz who said “we risk seeing
3% 2%
something akin to the wages explosion of the preAccord era” in a speech in January.
1%
The “breakout” or “explosion” has failed to
0% Jun 98
materialise. The Wage Price Index (WPI) grew by
Source: ABS 6345 and RBA. The CPI measure used here is from
just 2.6% over the year to the June 2014 quarter,
Jun 02
Jun 06
Jun 10
Jun 14
RBA table G1; it excludes interest and the tax changes of 1999-2000.
the slowest wages growth in the 17-year history of
Wages growth has slowed in every industry. Figure
that series, as shown in Figure 1. Wages growth of
3 compares wages growth in the year to June 2014
2.6% wasn’t enough to keep up with inflation, as
to the average for each industry over the period
the CPI rose by 3% over the year to the June
2004 to 2014. Wages in mining rose by only 2.5%
quarter. This is only the second time real wages
over the past year, compared to an average of 4%
have fallen since the creation of the WPI.
over the past 10 years. The fall in wages growth was even larger in professional, scientific and
ACTU Economic Bulletin – November 2014 – Page 1
technical services, where wages rose by 2% over
growth has slowed, while some industries continue
the past year rather than the 3.8% decade-average
to record strong growth. Only a tiny minority of firms
growth. Wages growth has slowed considerably in
(a little over 1%) have recorded wages growth for
both the private and public sectors.
their employees of over 5% in recent years, while the proportion of firms paying wage increases of 3-
Figure 3: WPI growth by industry – year to June 2014 and 10-year average
5% has fallen from about 32% over the decade to
Education and training
about 23%, as shown in Figure 4.
Electricity, gas, water and… Arts and recreation services
Other measures of wages have also slowed. On
Construction Health care and social… Public administration and… Manufacturing
average, current enterprise agreements provide for
Latest annual growth
10-year average
Australia
a 3.5% annual wage increase1; this is the lowest average wage increase in enterprise agreements since 1994.
Financial and insurance… Mining
Figure 5: Average annualised wage increase in federal enterprise agreements
Transport, postal and… Retail trade
Per cent 5.5
Information media and… Administrative and support…
5.0
Rental, hiring and real estate… Other services
Agreements lodged in quarter
4.5
Accommodation and food… 4.0
Professional, scientific and… Wholesale trade 0%
1% 2% 3% 4% Annual WPI growth
Source: ABS 6345 and ACTU calculations.
Figure 4: Distribution of wage growth across firms Per cent of firms 40
2.5
Jun 99
Jun 04
Jun 09
Jun 14
Source: Department of Employment, Trends in Federal Enterprise Bargaining.
Decade average
30
3.0
2.0 Jun 94
Average: 2011/12 to 2013/14
All current agreements
3.5
Table 1 summarises various measures of wages growth. Each measure is below its average for the past decade. The National Accounts measure of
20
wages (average compensation per employee) rose by only 2.3% over the year, down from a decade
10
average of 3.9%. Average weekly earnings for fulltime adults rose by 2.3%, barely half of its average
0
<0%
0-1%
1-3% 3-5% Wage growth
>5%
over the past decade (4.5%).
Source: NAB data and RBA analysis. See Kent 2014.
There is no pocket of rapid wages growth – all industries have seen growth slow to below its 10year average. It’s not the case that overall wages
Average annualised wage increase per employee in registered federal enterprise agreements. Note that legislative changes (such as the referral of state industrial relations powers to the Commonwealth) have changed the scope of this series. 1
ACTU Economic Bulletin – November 2014 – Page 2
economy slows. Rising unemployment has been
Table 1: Summary of wages measures Latest annual growth
10 year average
accompanied by slowing wages growth, as would be expected. If anything, the pace of wages growth has slowed a little more than would be expected given
Average compensation per employee
2.3%
3.9%
the
Wage Price Index
2.6%
3.6%
unemployment was around current levels (in 2004),
2.3%
4.5%
private sector wages were growing at 3.4%, rather
1.6%
4.2%
than the current 2.4%. Wage growth appears more
Minimum wage
3.0%
3.2%
Median full-time earnings
0.0%
4.1%
3.5%
3.9%
3.3%
3.9%
Average weekly ordinary time earnings (full-time adults) Average weekly earnings (all employees)
Average wage increase in current EBAs Average wage increase in EBAs lodged in quarter
unemployment
rate.
The
last
time
sensitive than previously to changes in labour market conditions. This is depicted in Figure 7. Figure 7: Wage Phillips Curve – unemployment rate and private sector WPI growth WPI growth 5.0%
Source: ABS 5206; ABS 6345; ABS 6302; FWC; ABS 6310; Department of Employment; ACTU calculations.
While wages growth has been slow, labour productivity growth has picked up strongly in the
4.5% 4.0%
past few years, with GDP per hour worked rising by 2.8% in the year to the June quarter. Slow wages growth and strong labour productivity growth mean
Sept 1998 to June 2009
3.5% 3.0%
Sept 2009 to June 2014
that unit labour costs (ULCs) have barely risen – non-farm ULCs increased by just 0.1% over the year.2
2.5% 2.0% 4%
Figure 6: Annual growth in nominal unit labour costs
5%
8% Total economy Non-farm
6% 7% Unemployment rate
8%
Source: ABS 6202 and ABS 6345. Shows year-ended growth in the private sector WPI and year-average unemployment rate (trend).
6%
The ‘wages breakout’ is a hardy perennial of the national newspapers, a bogeyman for the business
4%
set. Despite many warnings, it has repeatedly failed to materialise. A greater concern for the national
10-year average, 2.9%
2%
debate should now be the prospect of the opposite of a wages breakout – a prolonged period of
0%
-2% Jun 04
stagnation in real living standards.
Jun 06
Jun 08
Jun 10
Jun 12
Jun 14 Please send any comments, corrections, criticisms or
Source: ABS 5206.
The cause of recent sluggish wages growth is not a
compliments to Matt Cowgill at mcowgill@actu.org.au.
mystery. Unemployment has been rising as the
ULCs measure the cost of employing labour to produce a fixed volume of output. 2
ACTU Economic Bulletin – November 2014 – Page 3
Summary of recent data Employment and unemployment The tables and charts below summarise the latest available data about the Australian labour market.
Figure 9: Change in employment in the year to October Thousands 120 105.5 100
Table 2: Summary of labour force figures Monthly
Level
Employed persons
change
11,592,200
- Full time employment
24,100
8,058,500
33,400
Year-
80
ended change 105,500
65.2 60 40
3,533,700
-9,400
40,300
Working age population
19,150,800
29,500
340,700
60.5%
0.0
-0.5 ppts
Unemployment rate
6.2%
0.0
0.5 ppts
Unemployed persons
772,100
7,100
71,300
Youth unemployment rate Participation rate Underemployment rate (quarterly)
15.7 7.8
0 Full time Males
Part time Females
Total Total
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
Figure 10: Unemployment rate Per cent 6.5 6.0
14.0%
0.5 ppts
1.0 ppts
64.6%
0.1 ppts
-0.2 ppts
5.0
7.9
0.1 ppts
0.2 ppts
4.5
5.5
4.0
Source: ABS 6202, seasonally adjusted.
Figure 8: Change in employment between Sept and Oct 2014 Thousands 40 33.4 35 30
32.5
65,200
- Part time employment
population ratio
48.2 40.3
20
Employment-to-
57.3 49.5
26.1
24.1
25
20
15.8
3.5 3.0 Oct 04
Seasonally adjusted Oct 06
Oct 08
Oct 10
Trend Oct 12
Oct 14
Source: ABS 6202.
Figure 11: Employment to population ratio (15+) Per cent 64
15 10
8.3
7.3
5
63
1.0 62
0 -5
61
-10
-10.4 -9.4
-15 Full time Males
Part time Females
Total
60
Total
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
59 58 Oct 04
Oct 06
Oct 08
Source: ABS 6202.
ACTU Economic Bulletin â&#x20AC;&#x201C; November 2014 â&#x20AC;&#x201C; Page 4
Oct 10
Oct 12
Oct 14
Figure 15: Employment growth in the year to August 2013
Figure 12: Unemployment rates by state/territory 7.9
Tas
Professional, Scientific &…
7.2
Education & Training
6.0
Vic
6.8 5.8
Qld
6.7
5.8 5.8
NSW 4.1
ACT
5.4
2
Health Care & Social Assistance
33.1 31.5
Agriculture, Forestry & Fishing
26.3
Retail Trade
21.7
Construction
15.7
4 6 Per cent
8
10
Source: ABS 6202, trend.
Figure 13: Participation rate 15+ (%) 66.0
15-64 (%) 77.0
10.1 4.8
Accommodation & Food Services
Oct 2014
4.0 0
33.8
Transport, Postal &…
Oct 2013
4.9
NT
Other Services
Information Media &…
4.5 5.1
WA
44.7
Rental, Hiring & Real Estate…
6.7 6.6
SA
45.8
76.5
65.5
76.0
65.0
75.5
64.5
1.1
Manufacturing
-1.0
Financial & Insurance Services
-1.9
Administrative & Support…
-5.2
Electricity, Gas, Water & Waste…
-9.0
Arts & Recreation Services
-12.6
Wholesale Trade
-18.8
Mining
-21.3
Public Administration & Safety
-38.5
-60 -40 -20 0 20 Thousands Source: ACTU calculations based on ABS 6202, trend.
75.0
64.0
74.5
63.5
74.0 Oct 04
15-64 (LHS) Oct 06
Oct 08
15+ (RHS) Oct 10
Oct 12
63.0 Oct 14
Source: ABS 6202.
Figure 14: Underemployment and unemployment rates Per cent 14 12 10 Underemployment 8 6
4 Unemployment
2 0 Aug 09
Aug 10
Aug 11
Aug 12
Aug 13
Aug 14
Source: ABS 6202, trend.
ACTU Economic Bulletin – November 2014 – Page 5
40
60
Output and productivity growth
Figure 18: Annual growth in labour productivity (GDP per hour)
Table 3: Summary of March quarter National Accounts YearQuarterly Level ended change change Quarterly real GDP
396463
0.5%
3.1%
Real GDP per capita
16879
0.1%
1.5%
-
1.0%
2.8%
Labour
productivity
(total economy)
Year-ended growth 5% Fair Work Act
Work Choices
4% 3% 2% 1%
Labour productivity in
-
0.7%
3.2%
-
-4.1%
-7.9%
Wages share of income
53.5%
0.5
-0.2
Profits share of income
26.6%
-0.8
-0.2
the market sector Terms of trade
0% -1%
Seasonally adjusted -2% Jun 04
Jun 06
Jun 08
Jun 10
6%
Rental, hiring and real estate…
12.0%
Mining
5%
10.2%
Construction
20-year average, 3.3%
4% 3% 2% 1%
Seasonally adjusted Jun 06
Jun 08
Jun 10
Jun 12
Jun 14
Figure 17: Annual growth in nominal unit labour costs 8%
6%
6.2%
Health care and social…
4.9%
Accommodation and food…
4.8%
Information media and…
4.6%
Administrative and support…
3.7%
Other services
2.2%
Education and training
2.2%
Arts and recreation services
2.1%
Retail trade
1.6%
Public administration and…
-0.5%
Wholesale trade
-1.9%
Transport, postal and…
-2.0%
Electricity, gas, water and…
-3.3%
Professional, scientific and…
-4.1% -5.6%
-15%-10% -5% 0% 5% 10% 15% Annual GVA growth Source: ABS 5206.
2%
0% Seasonally adjusted Trend Jun 98
0.9%
Manufacturing
Agriculture, forestry and fishing
20-year average, 2.5%
6.7%
Financial and insurance…
Trend
Source: ABS 5206 and ACTU calculations.
-2% Jun 94
Jun 14
Figure 19: Growth in output (gross value added) – year to March 2013
Figure 16: Growth in real GDP per year
4%
Jun 12
Source: ABS 5206.
Source: ABS 5206.
0% Jun 04
Trend
Jun 02
Jun 06
Jun 10
Jun 14
Source: ABS 5206 and ACTU calculations. Non-farm.
ACTU Economic Bulletin – November 2014 – Page 6
Prices and wages
Figure 21: Headline and underlying CPI inflation Per cent 5%
Table 4: Summary of prices and wages data
Wage Price Index (WPI) Full-time average weekly ordinary time earnings (AWOTE)
Level
Yearended change
June
-
2.6%
May
$1,454.10
2.3%
2%
May
$1,454.10
-0.7%
1%
May
$1,123.00
1.6%
Real full-time AWOTE Total average weekly earnings (AWE) National Minimum Wage per 38 hour week
4%
Latest quarter
1 Jul 14
$640.90
3.0%
Headline CPI
September
-
2.3%
Trimmed mean (underlying CPI)
September
-
2.5%
Employees’ cost of living (LCI)
September
-
2.3%
May
18.3%
0.8%
Gender pay gap
3%
RBA's target band Headline CPI
0% Sep 04
Underlying CPI Sep 06
Sep 08
Sep 10
Sep 12
Sep 14
Source: ABS 6401.
Figure 22: Wage Price Index growth 4.5%
4.0%
Source: ABS 6345, ABS 6302, FWC, ABS 6401, ABS 6467, ACTU calculations.
3.5%
Figure 20: 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%
Source: ABS 6345.
-1% Sep 04
Sep 13
5.0%
2%
0%
Sep 08
Figure 23: WPI growth in the public and private sectors
3%
1%
Sep 03
Seasonally adjusted
4.5%
Underlying CPI Employee LCI
4.0% Sep 06
Sep 08
Sep 10
Sep 12
Sep 14
3.5%
Source: ABS 6467, ABS 6401.
3.0% 2.5%
Private Public
2.0% Jun 04
Jun 06
Source: ABS 6345.
ACTU Economic Bulletin – November 2014 – Page 7
Jun 08
Jun 10
Jun 12
Jun 14
Figure 24: WPI growth in the year to June by industry 0% 1% 2% 3% 4% Education and training
Figure 27: Average weekly ordinary time earnings for full-time adults (May 2014) $0 $1,000 $2,000
3.2%
Electricity, gas, water and…
Mining
3.0%
Arts and recreation services
3.0%
Construction
2.9%
Health care and social…
2.9%
Public administration and…
2.8%
Manufacturing Australia
Professional, Scientific…
$1,716.20
Information Media and…
$1,665.40
Financial and Insurance…
$1,665.30
Electricity, Gas, Water…
$1,659.10
Education and Training
2.7%
Public Administration…
2.6%
Financial and insurance…
2.6%
Mining
2.4%
Retail trade
$1,462.50
All Industries
$1,454.10
Construction
$1,449.20
Transport, Postal and…
2.4%
Information media and…
2.4%
Administrative and…
2.4%
Rental, hiring and real… Other services Accommodation and food…
Health Care and Social… Arts and Recreation… Manufacturing
$1,304.60 $1,294.40
2.3%
Administrative and…
$1,287.30
Rental, Hiring and Real…
$1,269.20
Other Services
2.0%
Wholesale trade
$1,442.50 $1,372.90
2.3% 2.1%
Professional, scientific and…
$1,552.20 $1,530.80
Wholesale Trade
2.5%
Transport, postal and…
$2,493.20
Accommodation and…
2.0%
Retail Trade
Source: ABS 6345.
$1,088.00 $1,048.10 $1,040.40
Source: ABS 6302.
Figure 25: Range of WPI growth rates across industries
7%
5%
Figure 28: Average annualised wage increase in federal enterprise agreements Per cent 5.5
4%
5.0
3%
4.5
2%
4.0
6%
Range of growth rates in all industries
1%
Agreements lodged in quarter
All current agreements
3.5
Australia 0% Jun 04
Jun 06
Jun 08
Jun 10
Jun 12
Jun 14
Source: ABS 6345 and ACTU calculations.
2.5
Figure 26: WPI growth in the year to June by state 0% 1% 2% 3% 4% SA
3.1%
Victoria
2.8%
NT
2.8%
Australia
2.6%
Qld
2.6%
NSW WA
3.0
2.0 Jun 94
Jun 99
2.5% 2.4%
Tas
2.3%
ACT
2.3%
Jun 04
Jun 09
Jun 14
Source: Department of Employment, Trends in Federal Enterprise Bargaining.
Source: ABS 6345.
ACTU Economic Bulletin – November 2014 – Page 8