Wages Report Issue 2, February 2012
There are still few signs of the ‘wages breakout’ that some employer groups have been warning about ever since the Fair Work Act came into effect. Wages growth picked up slightly in the December quarter, but the yearly growth rate remained the same – 3.6%, equal to the long-run average. Private sector wages are increasingly slightly faster, at 3.8% a year, while public sector wages are growing at their slowest pace for around a decade. Wages have grown only slightly faster than the cost of living, with CPI inflation running at 3.1% and the cost of living for workers up by 3.3% over the year. Inflation slowed towards the end of 2012.
Around one in every six Australian workers relies on award wages and the National Minimum Wage, which are generally adjusted once a year in July. Preparations are well under way for the ACTU’s submission to this year’s Annual Wage Review, in which the ACTU will advance the case for a real wage increase for Australia’s low-paid workers. This issue of the Wages Report contains a feature on Australian minimum wages. If you missed the first issue of the report, you may wish to have a look at the features on the gender pay gap and the wages share of income in each industry.
The ACTU Wages Report sets out key trends in wages and prices. It is accompanied by a Jobs Report and an Economic Report, each of which is released quarterly. Some measures that are relevant to wage developments, like productivity growth, hours worked, and unit labour costs, are covered in the other reports.
Wages and prices at a glance Latest quarter
Level
Quarterly change
Year-ended change
Wage Price Index (WPI)
December
-
1.0%
3.6%
Full-time average weekly ordinary time earnings (AWOTE)
November
$1330.20
0.5%
4.3%
Total average weekly earnings (AWE)
November
$1032.70
0.8%
3.7%
From 1 July 2011
$589.30
-
3.4%
Headline CPI
December
-
0%
3.1%
Underlying CPI
December
-
0.6%
2.6%
Employees’ cost of living (ALCI)
December
-
0.1%
3.3%
Gender pay gap
December
17.4%
-0.3pps
+0.4pps
National Minimum Wage
Source: ABS, FWA. Underlying CPI is the average of the trimmed mean and weighted median. All figures are seasonally adjusted other than the CPI and ALCI. The gender pay gap is calculated using full time adult AWOTE.
ACTU Wages Report | February 2012 | Page 1
Wage Price Index Ever since the Fair Work Act came into effect, the
still well below the pace recorded in the first phase of the
newspapers have been filled with warnings about a
mining boom.
looming “wages breakout”. Each quarter, the wages data from the ABS have punctured the rhetoric – wages growth dipped in the wake of the financial crisis, before
Figure 2: Private sector wage growth (year-ended) 4.5%
picking up to around its long-run average.
The Wage Price Index grew by 3.6% in the year to the
4.0%
December quarter. This is in line with its long-run average. Although the quarterly growth rate picked up a
3.5%
Long-run average
little (to 1%), this was off a low base in September.
Figure 1: Wage Price Index growth (year-ended) 4.5%
3.0% Private sector 2.5% Dec 01
4.0%
Dec 03
Dec 05
Dec 07
Dec 09
Dec 11
Source: ABS 6245.0 and ACTU calculations
Long-term average
3.5%
Wages growth in the public sector has been quite low for the past year or so, rising by 3.2% in 2011. This is the slowest yearly growth rate for public sector wages since
3.0%
2002.
Figure 3: Public sector wage growth (year-ended) 2.5% Dec 01
Dec 03
Dec 05
Dec 07
Dec 09
Dec 11
5.0% Public sector
Source: ABS 6245.0 and ACTU calculations
4.5% The WPI is a ‘pure price’ index that measures changes in hourly rates of pay for a fixed ‘basket’ of jobs. Unlike
4.0%
Average Weekly Earnings, the WPI is not affected by changes in penalty rates, allowances, bonuses or other
Long-run average
3.5%
compositional change. 3.0% The RBA said in its February Statement on Monetary Policy that “the wage price index is expected to continue to increase at around its current rate”. That prediction has been borne out so far, with the year-ended growth
2.5% 2001
2003
2005
2007
2009
2011
Source: ABS 6245.0 and ACTU calculations
rate staying at 3.6% in the December quarter. Private sector wages have been growing at a slightly above-average pace, up by 3.8% over the year. This is ACTU Wages Report | February 2012 | Page 2
WPI growth in Mining was surprisingly subdued over the year (3.6%), while several service industries saw solid
Figure 5: Year-ended WPI growth by State Northern Territory
wages growth, as shown in Figure 4.
4.5%
Tasmania
Figure 4: WPI growth by industry: year-ended Professional, scientific…
Western Australia
3.5%
New South Wales
3.4%
Queensland
3.3%
4.7%
Other services
4.4%
Wholesale trade
4.3%
Arts and recreation…
4.2%
Information media and…
4.1%
Financial and insurance…
4.0%
Construction
Australia
3.2%
South Australia
3.1%
Victoria
2.5%
Australian Capital Territory
2.4%
4.0%
Rental, hiring and real…
4.1%
0%
1%
2%
3%
4%
5%
4.0%
Accommodation and food…
Source: ABS 6345.0
3.8%
Manufacturing
3.7%
Education and training
3.6%
the change in the cost of employing a fixed ‘basket’ of
Mining
3.6%
labour – it deliberately strips out the effect of
Transport, postal and…
It should be remembered that the WPI is a measure of
3.5%
Electricity, gas, water and…
compositional change in the labour market. If, for
3.2%
Retail trade
example, more people find work as geologists and fewer
3.1%
Administrative and…
3.0%
Health care and social…
3.0%
Public administration and…
2.9%
0%
1%
2%
people find work as retail assistants, average wages will go up (because geologists have higher average wages than retail assistants), but the WPI is unlikely to be affected. The WPI tries to measure changes in the cost
3%
4%
5%
of employing labour of a fixed quantity and quality.
Source: ABS 6345.0
The Average Weekly Earnings series measures by the The strongest WPI growth over the year was in the
ABS gives a sense of average wage movements, which
Northern Territory and Tasmania, though the rate of
don’t remove the effects of compositional change.
growth in Tasmania slowed significantly in late 2011.
Average earnings figures are examined in a later section of this report.
ACTU Wages Report | February 2012 | Page 3
Feature: Australian minimum wages With more workers than ever before covered by
of $19.50 per hour in 2010 (the latest data), whereas
enterprise agreements, there are fewer workers reliant
employees earned an average of $28.40 per hour.
on award wages and the National Minimum Wage (NMW). Nevertheless, around one in six Australian
Table 2: Hourly earnings of award-only employees and all employees - May 2010
workers still rely on minimum wages.
Award-only employees
All employees
Fulltime adults
Permanent/fixed term
$19.90
$30.80
Casual
$21.80
$27.00
Permanent/fixed term
$19.80
$24.80
retail trade; health care and social assistance; and
Parttime adults
Casual
$21.70
$24.10
administrative and support services. Table 1 shows the
Juniors
$11.90
$13.20
number of award-reliant employees in each industry as
Total
$19.50
$28.40
Minimum wage workers are spread across a range of industries, but a significant proportion are employed in four industries – accommodation and food services;
Source: ABS 6306.0, unpublished data.
at May 2010. Table 1: Award reliance by industry
Minimum wage increases over the past five years or so
Awardreliant employees (thousands)
Proportion of employees that are award-only
Accommodation and food services
291.6
45.2%
Retail trade
204.9
22.3%
193.6
17.1%
161
31.4%
Manufacturing
120.8
14.6%
Other services
88.2
27.2%
Construction
53.2
10.0%
Wholesale trade
45.9
10.9%
Education and training
43.1
5.1%
$550
40.3
22.8%
$500
32.9
8.0%
26.2
4.2%
Industry
Health care and social assistance Administrative and support services
Rental, hiring and real estate services Transport, postal and warehousing Professional, scientific and technical services Arts and recreation services Public administration and safety Information media and telecommunications Financial and insurance services Electricity, gas, water and waste Mining
have only just compensated for inflation for workers on the NMW, which is equal to the C14 rate in the manufacturing award. The tradespersons’ rate (C10) hasn’t risen in real terms since the 1990s. Figure 6: Real minimum weekly wages - full time $750 C10
$700 $650 $600
$450 1991
C14/NMW
1995
1999
2003
2007
2011
Source: ABS 6401.0, historical minimum wages data, ACTU calculations.
24.1
15.1%
12.8
1.9%
9.2
5.7%
(and have not even done that for some higher award
7.9
2.1%
classifications), while wages for other workers have
3
3.1%
2.6
1.9%
Minimum wages have only just kept up with inflation
been increasing in real terms. As a result, minimum wages have fallen further behind average wages. The NMW rate was about 63% of median full time earnings
Source: ABS 6306.0
in 1995, but has fallen to 54% of the median today. The As you’d expect, award-reliant employees have earnings
decline has been steeper for higher award rates, with
that
C10 falling from around 80% of average earnings in
are
significantly
below
the
average
for
all
employees. Award-reliant workers had average earnings ACTU Wages Report | February 2012 | Page 4
1995 to 63%. These measures, known as the minimum
generous than in many other countries, our minimum
wage ‘bite’, are shown in Figure 7.
wages are slowly becoming more ‘middle of the pack’.
Figure 7: Minimum wage 'bite' - the ratio of minimum wages to the median full time wage 90%
Figure 8 (at the bottom of the page) shows the minimum wage ‘bite’ in OECD countries in 2000 and in 2010 – although Australia’s is still relatively high, it is one of the few to have fallen over the decade.
80% C10 bite
70%
Australian minimum wages are still higher than in many other countries, but this has not harmed our employment growth. We have one of the lowest unemployment rates
60%
in the developed world. Nevertheless, it is alarming to
C14 bite
see low-paid workers’ wages slip further behind average
50%
and median wages, and even fall in real terms in some years. The criteria for minimum wages fixation in the Fair
40% 1990
1995
2000
2005
2010
Work Act are much fairer than those in the previous Act, making it clear that low-paid workers’ relative living
Source: ABS 6310.0, historical minimum wages data, ACTU calculations.
standards and needs should be taken into account. The Minimum wage workers also haven’t shared in the
Minimum Wage Panel of Fair Work Australia has, in its
benefits of productivity growth. Over the past five years,
first two decisions, awarded solid wage rises to award
labour productivity grew by 4.6% (in the market sector),
workers, but these came after the wage freeze of 2009.
while real minimum wages did not increase. The ACTU will ask the Panel to increase real minimum Australia is relatively unique in that we have a skill-
wages in 2012 in order to promote social inclusion and
based structure of minimum wages (embedded in
maintain fairness for Australian workers.
awards) as well as the National Minimum Wage (NMW). th
For most of the 20 Century, Australia also stood out for having higher minimum wages than the rest of the world. Although the Australian wages safety net is still more Figure 8: Minimum wage as a proportion of median full time wage in OECD countries - 2000 and 2010 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20%
2000
2010
Source: OECD Stat.
ACTU Wages Report | February 2012 | Page 5
Average Weekly Earnings Just as the Wage Price Index hasn’t provided any
Throughout the late-90s and early-to-mid 2000s, the
support to claims of a wages breakout, the average
average full time earnings in the highest-paid industry
earnings data show that earnings growth has been
was around double the average in the lowest paid
sustainable, even somewhat modest. Over the year to
industry. For the past five years or so this ratio has
the November quarter, average weekly ordinary time
grown, as earnings in the higher paid sectors has
earnings for full time adults (AWOTE) rose by 4.3%,
increased more rapidly than earnings elsewhere.
below its average for the past decade of 4.8% yearly growth. Figure 9: Full time AWOTE growth (year-ended) 7%
Figure 11: Ratio of highest to lowest industry AWOTE Ratio Ratio 2.4 2.4
6% 5%
Decadelong average
4% 3%
2.2
2.2
2.0
2
1.8
1.8
2% 1% 0% Nov 01
Nov 03
Nov 05
Nov 07
Nov 09
Nov 11
Source: ACTU calculations based on ABS 6302.0.
In the November quarter, AWOTE rose by only 0.5%, a
1.6 Nov 95
Nov 99
Nov 03
1.6 Nov 11
Nov 07
Source: ACTU calculations based on ABS 6302.0 (original).
significant slowing in the rate of quarterly growth, down from 1.3% in each of the previous two quarters. The gap
The average full time earnings in Mining was $2185 per
between
week in the November quarter, compared with the
the
highest-
and
lowest-paid
industries
continued to widen.
average for all industries of $1330. The average in the
Figure 10: Real AWOTE over time in high-paid and low-paid industries $2,250 Highest industry $2,000 AWOTE
lowest
paid
industry,
Accommodation
and
Food
Services, was $957 per week.
$1,750 $1,500
Overall AWOTE
$1,250 $1,000
Lowest industry AWOTE
$750 $500 Nov 95
Nov 99
Nov 03
Nov 07
Nov 11
Source: ACTU calculations based on ABS 6302.0 (original), ABS 6401.0.
ACTU Wages Report | February 2012 | Page 6
Figure 12: AWOTE by industry Mining
Taking inflation into account, real average full time wages grew by 1.1% in 2011.
$2,185
Professional, Scientific…
$1,581
Financial and Insurance…
$1,548
Information Media and…
$1,543
Electricity, Gas, Water…
$1,508
Education and Training
Figure 14: Real AWOTE
$1,350 $1,300 $1,250
$1,407
Public Administration…
$1,403
Construction
$1,368
Wholesale Trade
$1,339
All industries
$1,330
Transport, Postal and…
$1,289
Health Care and Social…
$1,269
Rental, Hiring and Real…
$1,217
Arts and Recreation…
$1,202
Manufacturing
Real AWOTE
$1,200 $1,150 $1,100 $1,050 $1,000 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11
$1,192
Administrative and… Other Services
Source: ACTU calculations based on ABS 6302.0, ABS 6401.0
$1,152 $1,051
Retail Trade
The gender pay gap fell slightly in the quarter, but
$979
Accommodation and… $0
remains elevated well above the typical level for the
$957 $800
$1,600 $2,400
1990s and early 2000s. The gap, calculated using fulltime AWOTE, was 17.4% in November 2011. Figure 15
Source: ABS 6302.0 (original).
shows this measure of the gender pay gap, along with a
The ACT has the highest average full time earnings of any jurisdiction, $1540 per week, just beating out WA. Tasmania remains the lowest paid jurisdiction on this
measure calculated using an estimate of all employees’ average hourly earnings. The rise in this second measure has been even more pronounced.
measure.
Figure 15: Gender pay gap 20% Figure 13: AWOTE by State
ACT
$1,540
WA
$1,523
NT
17%
$1,375
NSW
Full time AWOTE
14% All employees total hourly earnings
$1,326
Vic
$1,293
Qld
$1,293
SA
11%
8%
$1,216
Tas
$1,172 $0
$500
$1,000
$1,500
$2,000
5% Nov 95
Nov 99
Nov 03
Nov 07
Nov 11
Source: ABS 6302.0 Source: ACTU calculations based on ABS 6302.0 (seasonally adjusted and original) and ABS 6291.0.55.003 (original). The total hourly earnings GPG is a 5-quarter centred moving average.
ACTU Wages Report | February 2012 | Page 7
Prices In the year to the December 2011 quarter, employees’
The largest price rises in the year to the December
cost of living (as measured by the Analytical Living Cost
quarter
Index or ALCI) increased by 3.3%, while the Consumer
insurance and financial services (5.6%).
were
recorded
in
education
(5.8%)
and
Price Index (CPI) increased by 3.1%. Headline inflation and the rate of increase in the cost of living for working households both fell during 2011.
Figure 17: Inflation by expenditure groups - year to December 2011 quarter Education
The gap between these two measures fell in 2011, partly
5.8
Insurance and financial…
5.6
as a result of the fall in mortgage interest rates, which
Transport
4.0
are included in the ALCI but not the CPI. The increase in
Housing
4.0
its
Health
subsequent fall, is largely due to the effect of the natural
All groups CPI
3.1
Alcohol and tobacco
3.1
headline
inflation
in
early-to-mid
2011,
and
disasters of early 2011, notably the Queensland floods and Cyclone Yasi.
Underlying inflation, also known as core inflation, has remained around the middle of the Reserve Bank’s
3.6
Clothing and footwear
2.6
Food and non-alcoholic…
2.5
Communication Recreation and culture Furnishings, household…
1.6 0.5 0.2
target band of 2 to 3 per cent. In the year to the 0 2 4 Year-ended change (per cent)
December 2011 quarter, both the trimmed mean and the weighted median increased by 2.6%. Figure 1 shows the
Source: ABS 6401.0.
year-ended inflation rates and ALCI growth over the five years to December 2011. The RBA forecasts both headline and underlying Figure 16: Headline and underlying CPI inflation and change in the employee cost of living (year-ended) Per cent 7
inflation of around 2.5% in 2012, the middle of its target band. This forecast excludes the effect of the carbon price package.
6 5 4 3 2 1 0 -1 Dec 06
Dec 07 CPI
Dec 08 Dec 09 Dec 10 Dec 11 Underlying inflation ALCI
Source: ABS 6463.0, ABS 6401.0, Underlying inflation in the period to December 2011 is the average growth rate in the trimmed mean and weighted median CPI analytical series.
ACTU Wages Report | February 2012 | Page 8
6