The pandemic has been fantastic for profits but woeful for wages

Over the 12 months to the end of March 2021, wages rose by a dismal 0.72%. That’s according to recent data from the Australian Bureau of Statistics (ABS).

Well, naturally, it has been a disastrous year for everyone, we might say in response, and this is only to be expected. We would be wrong. The year to March was a superb year for Australia’s corporate profits, which the same source said soared 12.1%. 

This bolsters claims by the Morrison government’s critics that its responses to the global pandemic have protected the big corporations more than the majority of Australians. The ABS has quantified the difference: 16 times more.

The average annual wage rise Q1 to Q1 over all 19 years since the ABS began this series is 4.92%. So the latest year’s wage rise is one-seventh of the average. It is the second-worst on record, with only 2008-09 — at the depths of the global financial crisis (GFC) — yielding a lower outcome.

Inflation for the year to March 2021 was 1.1%, so wages overall actually declined over the year in real terms by 0.38%. When we consider that high-income salary-earners enjoyed strong pay rises, the decline in incomes for the majority of Australian workers was far greater than that. According to recruitment agency Michael Page, executive salaries are rising in 2021 by an average of 3.55%.

Profits, in contrast to wages, are booming across most of the economy, although not all. Profits in electricity, gas and water rose 9.6% year on year, manufacturing 27.1%, construction 38.6% and accommodation and food up 73.2%.

The strongest sectoral rise, not surprisingly during this medical emergency, was professional, scientific and technical services, with profits up 75.3%.

Sectors whose profits declined over the year included rental, hiring and real estate, financial and insurance services, and information media and telecommunications.

The critical measure, of course, is total growth in profits economy-wide. In the year to March 2021 this was 12.1%, well above the long-term annual average of 10.9%.

Growth through the Coalition period

Over the last eight years, profits overall have risen 72.8%, an average annual lift of 7.07%. Several sectors have more than doubled their profit take over that period, including mining, manufacturing, accommodation and food, professional, scientific and technical services, and administrative and support services.

Wages have risen over the last eight years under the Coalition by a total of 24.2%, or a miserly 2.7% per year on average. Inflation has averaged 1.8%.

By way of comparison, over the six years of the previous Labor administration, profits rose 13.0% overall, or 2.7% per year on average. Wages rose 35.9%, or an average of 5.2% per year.

This can easily be fixed

Wage growth is critical to normalising monetary policy and improving economic outcomes overall, as Crikey has observed before. The need for wage growth is now a regular theme in speeches by Reserve Bank chief Philip Lowe. There is also the matter of social justice, which may well become an election issue in coming months.

Many Coalition policy decisions have boosted profits at the expense of wages. The Morrison government last year took the opposite course to the Rudd government when faced with a similar global recession. Labor sent cheques to households and welfare beneficiaries; the Coalition paid businesses. 

When corporations were found to have pocketed government handouts wrongly, they were not obliged to return the funds but were free to add them to their profits.

The Morrison government could do far more to raise wages if it so chose. It could eliminate the bizarre anomalies in the COVID emergency payments system and make support available to all who genuinely need it at the level required. 

It could argue for greater increases in the minimum wage in its submissions to the Fair Work Commission’s annual wage reviews. It could appoint to the FWC commissioners committed more to workers’ well-being than to coddling corporations. It could raise the wages of its own Commonwealth employees without recourse to any tribunal, as Crikey has argued before. And it could take more aggressive legislative and administrative action against wage theft. 

If these cost money, then getting the big exporters to pay a fair share of tax is a readily available course of action.