Finally, genuine wage growth, but how will it be achieved?

What is the issue?

After nearly a decade of wage stagnation and real wage falls during the pandemic, the government is forecasting a tight employment market that will finally drive wages growth above 3% — a level unseen since before 2013.

Why is it an issue so far?

Labor argues that the government has deliberately suppressed wages growth to benefit business, and has committed to push for stronger wages growth if elected. In an environment of higher inflation, a lack of strong wages growth will see continuing falls in real wages, at the same time as households with mortgages face rising interest rates as the Reserve Bank responds to inflation.

What are the parties saying and offering?

The government forecasts wages growth to rise from 2.75% this year to 3.25% in 2022-23 and 2023-24, rising to 3.5% after that. If the budget forecasts are correct, real wages growth before tax will not reach 1% annually until 2025. The Coalition also intends to rapidly return to high levels of temporary migration to meet employer demands for foreign labour. Labor is committed to pursuing higher productivity, improving wages in the gig economy and supporting annual minimum wage increases by the Fair Work Commission.

What’s up for discussion? 

The one big lever the Commonwealth has for increasing wages growth is that it is the biggest employer in the country. The Coalition has curbed public service wages growth since it came to office and used the pandemic to impose an ongoing ban on pay rises above the level of private sector wages growth. Labor has made no commitments to increase Australian Public Service (APS) pay, saying instead “the inflexible wage cap and pegging policies deny APS workers their right to seek improvements for improved performance and outcomes” — signalling that higher wages growth in the public sector will only be driven by higher productivity.

Other major impediments to wages growth — such as corporate power and an industrial relations system tilted against workers and unions — also do not figure in Labor’s reform agenda. Temporary migration, which has played a significant role in wage stagnation, is being targeted by Labor. Opposition home affairs spokeswoman Kristina Keneally has called it “a path to becoming a guest worker nation”, but the opposition has yet to detail its planned reforms, beyond saying it will favour permanent over temporary migration.