Is there any problem that neoliberals can’t fix with industrial relations deregulation and shrinking the size of government? Apparently not. Today, former Deutsche Bank economist Adam Boyton takes to the pages of the Financial Review to offer his take on wage stagnation. “Given some of the commentary on this issue you could almost be forgiven for thinking there is a conspiracy of sorts holding wages back,” Boyton argues. But against these tinfoil-hatted loons, Boyton makes his case: wage stagnation is because workers aren’t working hard enough and government is too big. 

“Given the importance of productivity growth in sustaining higher real wages, if there is little or no growth in one it shouldn’t be too surprising to see little or no growth in the other,” he insists, pointing out relatively weak productivity measure growth in the national accounts. “Increasing the size of government is also popular these days … Australia has, for nearly a decade now, seen total government spending above 40 per cent of GDP following a step up during the GFC. If modern economies are driven by creativity and innovation, then bigger government and more regulation is likely to be the problem, not the solution.”

So there you have it. Low wages growth is because employers don’t have the “flexibility” to cut wages more, and because larger government … well, we’re not quite sure why Boyton thinks that stifles wages growth. Something something “creativity”. Anyway. Reverse the “reregulation” of industrial relations he insists has happened in recent years, and cut the size of government, and wage growth will surge like a fountain!

Alas, there are a couple of tiny flies in the ointment Boyton would lather on our hip pocket nerve.

If Boyton wants to talk national account productivity figures, let’s hark back to the financial years 2014-15 and 2015-16. In 2014-15, GDP per hour worked grew a total of 0.5%. Annual WPI growth that year was 2.4%. In 2015-16, GDP per hour worked more than trebled to a much healthier 1.7%. “Given the importance of productivity growth in sustaining higher real wages,” did this mean a rise in WPI growth? Alas for Boyton, in 2015-16, annual growth fell to 2.2%. And if you’re wondering whether there was some lag, annual growth fell further to 2% in 2016-17. Seems like productivity growth is pretty rubbish at sustaining higher real wages …

Then there’s the link between higher government spending and wage stagnation. And there does appear to be a bit of evidence to back this up. Under Julia Gillard and Wayne Swan in financial year 2012-13, spending as a proportion of GDP fell below 24% compared to the 25.4% it now is under the big-taxing, big-spending Liberals. And annual WPI growth that year was 3.3%. Three point three! Aussie workers would give their eyeteeth for 3.3% now — it’s more than twice what some private sector workers are getting.

Only problem is, Adam plainly didn’t check the wage growth numbers properly. Where is the strongest wages growth currently coming from? In the year to March 2018, the strongest wages growth was in health/social care (2.9%) and education (2.4%) — both sectors dominated by government, where governments have increased spending in recent years on NDIS and Gonski. In fact, the only reason there’s been any increase in growth in wages since the start of this financial year is because of government spending in health and education and public services generally, and because the industrial relations umpire increased the minimum wage in the middle of 2017. Without those government interventions, wages growth would have fallen further.

Still, at least Boyton spared us the normal third solution in the neoliberal trifecta, how a company tax cut will increase wages. For that, we’re genuinely grateful.