Ultra low wage growth isn’t accidental. It is the intended outcome of government policies (updated)

That’s the headline for my latest piece in The Conversation, my contribution to a three-part series mini-symposium on Wages, Unemployment and Underemployment presented by The Conversation and the Academy of the Social Sciences in Australia.

Key quote

For more than forty years, both the architecture of labour market regulation and the discretionary choices of governments have been designed with the precise objective of holding wages down. These policies have been highly successful.

Update: Paul Krugman has a recent piece in the New York Times, also making the point that technological progress isn’t responsible for the falling wage share.

10 thoughts on “Ultra low wage growth isn’t accidental. It is the intended outcome of government policies (updated)

  1. Bastard Boys
    Greg’s War/Josh’s War 
    ( watch via link below )

    JQ said; “and the use, in 1998, of ex-military strikebreakers to break the Maritime Union of Australia. Their training and deployment was facilitated by a government consultant who worked with the major waterfront employer, Patricks.
    orchestrating the offshore training of the replacement workforce through the actions of consultant Stephen Webster and other shadowy ex-military figures.”

    Dont forget…
    …”Coombs got more concrete information in writing from his mole. On letterhead of a company called Fynwest Ltd was a recruiting contract for a training program in Dubai. There was also background on the two men behind Fynwest, ex-military men Mike Wells and Peter Kilfoyle. When did you first become aware of it?”…
    …”Peter Reith responded, “The answer is I am not aware of it at all”…
    …”Peter Reith was the key government player in making it happen. To manage the project, he brought in Stephen Webster, a consultant for Australia’s richest men, Richard Pratt. It was Webster who hired Wells and Kilfoyle to put together the army team for Dubai.”…
    …” but he claimed the parliamentary debate was the first he had heard of the Dubai venture.”…
    …”Corrigan was lying.”…
    …” Peter Reith was the key government player in making it happen. To manage the project, he brought in Stephen Webster, a consultant for Australia’s richest men, Richard Pratt. It was Webster who hired Wells and Kilfoyle to put together the army team for Dubai.”…

    The human “Toll” (holdings)…
    “It was really a brutal and barbaric way to deal with employer-employee relationships,” he says. “There has been a lot of family dysfunction, marriage break-ups and the like, as a result of those events. It changed my life and I still don’t know anyone who can talk about it without getting emotional.”

    “Legendary waterfront warrior Chris Corrigan has announced he will stand down as chairman of logistics giant Qube,just months after the company completed the takeover of Asciano’s Patrick’s container ports business.”

    The dirt…
    …”Over the week Mr. Corrigan’s shareholding has improved in value by $256,000 a day, or $2.1 million overall. His 3.8 million shares, which are understood to represent the vast bulk of his personal wealth, were worth $7.2 million last week. Today they are valued at $9.38 million.Patrick boss Chris Corrigan says the wharfies weren’t sacked; they were still employed by the four Patrick subsidiaries that had always employed them. It is just that as of last week the four companies no longer have a contract to supply employees to Patrick’s operating company.”…
    …”The Patrick employment subsidiaries have been stripped of most of their assets by the parent company and have accumulated liabilities of $56 million.”…


  2. I thought it was a good article, understated and probably the better for it.

    Probably would go with a prospective second page on international influence on Australian economic and political decision making and who would benefit from that. It would probably include everything from FTAs designed to benefit local political allies, through to outright interference from foreign entities leading to or involving the ending of royalties for mineral exports or taxation agreements re TNC’s.

    It offers little hope for the future and that is the most honest way the writer could have gone.

    It does offer an insight into the suspicion, even paranoia ( leading to Christchurch?) felt by ordinary people in an environment where government has become more opaque and excluding of the public and society has become an information vacuum as to community consideration of things like gas fracking and agribusiness projects and other forms of so-called “development” for example, are now thwarted.

    People fear disempowerment- the world is already too full of examples of people elsewhere already disempowered and what comes of that and that is why the public is now vulnerable to suspicion- creating wedge politics when there is such a credibility deficit as to politics.

  3. Government’s may have had this intention of keeping wages low – to prevent unemployment perhaps – but it is almost certainly not the reason for low wage growth. Governments “generally” cannot peg low wages in a market economy, nor can Bill Shorten, as he claims, increase them. Wages growth has been weak globally – not only in Australia – for many reasons but, at core, .is the competition from foreign labour – an impact of globalisation. The growth of China and other developing countries has provided a seismic shift in labour market competition. Stiglitz and others have chronicled this at length.

    If you are looking for domestic factors a key issue is the massively high labour immigration that has meant our labour force is growing faster than in almost any other developed country. Many immigrants take jobs in the service sector that local Aussies turn their noses up at. But throughout the economy as a whole the impact of substantial labour force growth in a somewhat weak economy has been significant.

    Indeed employers clamor for high immigration on the grounds of “labour force shortages”. One way of dealing with a shortage is to bid up wages or spend money on training. Another way is to import more immigrants – Australia has chosen the latter path. Indeed this is the reason for the word “generally” in the second sentence – governments can influence wage outcomes partially through their immigration policy settings which in large part drive the supply of labour.

  4. Harry,

    you can’t have it both ways. You start by saying that global factors are the cause, then you say that domestic immigration policy is the cause. But if domestic immigration policy can cause low wage growth, then other domestic policies can also cause low wage growth. The domestic policy of reducing the bargaining power of labour just might have had something to do with it too.

  5. With respect to John Quiggin’s views and Harry Clarke’s views on this topic, it does not have to an “either-or” situation. It is quite possible for the factors each refers to be operating at the same time, in what is after all a very complex system. I think the data bear out that Quiggin and Clarke are each pointing to real contributory phenomena in the system.

    There has been a decline in the wage share of national income from the highs of 1975 – 1985. There has been a concomitant attack on unions, unionization, minimum wage levels and more recently on penalty rates. It has been both the implicit and often expressed intention of governments from the Fraser Government onward to moderate wage demands and to take real measures to do that. Governments may not have unlimited power to press such an agenda but they do have significant power. To “moderate” in this context means to hold back or retard.

    The graph in J.Q.’s article is interesting. Wages (as national income share) were highest in the stagflation era. The graph since then could be seen as merely drifting back to the national income share of the Keynesian Golden Age. Perhaps a Keynesian should accept this as a good thing and good economics? However, I think that that would be a premature judgement. There are many factors which such a simple graph does not capture. The progressive and worsening under-measuring of unemployment and under-employment is a clear issue. Measures are changed. More and more unemployment and under-employment are not captured in the statistics. Wage disparities have risen. While incomes for skilled and management level workers have risen faster, incomes of the unskilled have dropped in relative and sometimes absolute terms. In a climate of falling income share in the economy, this means greater inequity.

    Harry Clarke is right to point out the impact of globalization. It takes the form of global labor arbitrage. Workers in the West, in the 1950s to 1970s, were part of what Marxists called “the aristocracy of labor”. Capitalists in that era came to an accommodation with western workers in the form of higher wages to buy off and damp demands to radically change Western capitalism itself. Workers and citizens of the undeveloped world subsidized this accommodation through their low wages and the stripping of their lands’ resources on unequal terms. We can call this imperialist exploitation or maybe “commodity arbitrage” or “physical arbitrage”.

    Harry Clarke is also right to point out the impact of high immigration rates in increasing the labor supply. There is a nexus of interests promoting high immigration rates for Australia. This nexus of interests is a broad church and includes elements from the right and left of politics. One might call it a bi-partisan policy at the political level but a more contested policy at the ordinary citizen level. On the right, the financial interests (think upward pressure on property prices) and business interests (think downward pressure on wages) have been and are in favor of high immigration. On the left (more left than the Labor party who mostly sided with the right on immigration policy), those concerned with human rights and more open borders have also pushed for, or acceded to, high immigration levels. Crossing the left-right spectrum are new Australians who push for higher immigration for their own personal and sectional interests essentially.

    Then, we have the extreme or alt-right populists who push for closed borders and low or no immigration or else discriminatory (racist) immigration laws. On the green or eco left we have some persons concerned about the long-term sustainability of the Australian continent and economy and who argue for zero population growth to be implemented sooner rather than later. This thoughtful eco-left is unfairly branded as racist along with the alt-right populists.

    To disclose, I am of the eco-left or that portion of it which advocates zero population growth for Australia as a near to mid-term goal. It is possible to separate refugee policy from zero population growth. It is possible to advocate and implement a reduction in voluntary migration plus an increase in refugee intake (following all UN and international refugee conventions) such that net immigration intake is neutral. Australia’s emigration rate runs at about 100,000 persons. This gives ample scope to adjust refugee and voluntary immigration rates to net migration out about zero. There is no reason at all that voluntary immigrants under that plicy would need to be raciallyt sorted. In other words, it is not an intrinsically racist policy. Our natural population increase is already close to zero and could be fine-tuned by policy.

    All of this illustrates why immigration policy is such a contested space. Those on the left who argue for high immigration are in effect arguing for lower wages in Australia. They are also arguing for Australia to grow above sustainable levels and to thence collapse ecologically, economically and socially. A lot on the moderate left have some very confused thinking on these issues. They lack realism. I’ll try to post about “Left Realism” sometime and in the process argue that Left Realism should be about more than just critical criminology theory as it is at the present. I haven’t examined Left Realism in critical criminology so I don’t know if I agree with it or not. I simply want to hijack the term Left Realism for a much wider application, namely to all left policies.

  6. <em?Wages (as national income share) were highest in the stagflation era.

    That was more because profits were down than wages were up.

  7. Harry Clarke:

    Many immigrants take jobs in the service sector that local Aussies turn their noses up at.

    I think you may be misrepresenting the situation, Harry. The jobs that you presumably think “local Aussies turn their noses up at” are jobs where the employees do NOT want to employee local Aussies. That includes low skilled rural jobs like fruit picking. Employers know that locals are far more likely to complain about underpayment, poor working conditions, physical and sexual abuse and the accomodation rorts that are rife in those sectors.

    Four Corners ran an exposé on rural work some years ago. Some of the bosses exclusively sourced Asian backpackers because they were the least likely to complain.

    Why would anyone want to work on these conditions: ***www.theage.com.au/national/victoria/why-i-lasted-just-five-weeks-working-in-the-apple-industry-20190222-p50zl1.html

  8. Ikonoclast – “A lot on the moderate left have some very confused thinking on these issues.”

    This is not in their formal platforms by any accident, nor through ignorance. It is deliberate. The moderate left here, as has happened elsewhere, may soon enough receive an electoral dose of realism concerning these issues courtesy of the immoderate right, and a “lesser of two weevils” choice made by voters.

  9. Smith9, Obviously fallacious thinking. Immigration affects the supply of labour and hence labour markets. Bill Shorten’s antics do not.

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