Finally a bump in wages — a one-off, but welcome anyway

Well, credit where it’s due: Labor said it would lift wages growth and, at least for the three months to September, it has.

Wages growth has been chugging along at 0.8% a quarter since mid-2022 — good by Coalition-era standards, when wage stagnation was a deliberate design feature of policy, but barely up to the level when Labor was last in power, and still well below inflation. Finally, in the September quarter, workers on average actually had a rise in their real wage, albeit 0.1%.

Three big interventions played a major role in the rise, though pleasingly the labour market showed some signs of what you might term “organic” growth.

The September quarter wage price index (WPI) rise of 1.3% was, according to the Australian Bureau of Statistics (ABS), the largest quarterly rise recorded in the 26 years the WPI has been measured. The consumer price index rose 1.2% in the same period on a headline basis while the favoured core measure, the trimmed mean, was also up 1.2%

The quarter made for a 4% increase in wages over the year to September — the highest since 2009 — but workers were still behind in terms of annual real wage growth, given the annual inflation rate to September was 5.4%. Private sector wages growth — 4.2% — fell less in real terms than the public sector level of growth of 3.5%.

The big rise was driven by the Fair Work Commission’s annual wage review decision that saw low-paid workers receive an award increase of 5.75%, a result cheered by the government back in June. And the first tranche of the commission’s aged care work value decision was also implemented, giving aged care workers an immediate rise of 15% — again, with the support of the government, which had committed to fund the decision.

And if you remember Philip Lowe railing against government wage caps back in the days before his re-embrace of neoliberal orthodoxy, there was also a public sector wages bump from the removal of state government wage caps and bargaining rounds being completed.

While a tight labour market reinforced these factors, they were all expected, including by the Reserve Bank in its last statement of monetary policy for the year earlier this month. They’re all one-offs, although there will hopefully be further adjustments to aged care remuneration after the Fair Work Commission finalises its determination about the sector.

More positively, wage growth in the quarter occurred across each of the different wage-setting methods. Jobs paid by individual arrangements were the main driver of wage growth (that’s been happening since late 2020), but award and enterprise agreement jobs also contributed more to wages growth than historically seen in a September quarter. And both the proportion of jobs that had a wage increase and the size of the increases received played a role in growth.

Accommodation and food services — hospitality to people outside the ABS — saw the biggest rise, 3.2% in the quarter and 5.5% in the year. Because that sector employs nearly a million people, that had a substantial impact on the overall result. But as the ABS pointed out, some hospitality jobs received two award increases over the year due to a scheduled delay in the implementation of the 2021-22 annual award review determination by the Fair Work Commission, driving the higher-than-usual annual growth for this industry. That also means their quarterly and annual rates will fall sharply in the next couple of quarters.

But health and social assistance had an even bigger impact: 3.1% for the quarter and 4.9% annually. That was a little less than hospitality but because that sector employs a massive 2.1 million people, or more than one in seven workers, including around 200,000 residential care workers, any wage movements have a major impact on overall growth nationally.

The lowest annual growth (3.1%) was in financial services — a sector where it’s raining profits and buybacks and higher dividends at the big four banks who are responsible for most of the employment in this sector.

And the mining industry recorded the lowest quarterly index growth (0.8%) — suggesting allegedly “militant” unions in the sector have good grounds for the industrial disputes that have the galahs at The Australian Financial Review shrieking about threats to global energy markets.

Speaking of said AFR galahs, they immediately began flapping and squawking about inflation after the ABS release. Nothing like a good old wage-price-spiral scare — how dare workers finally reverse what is now years of real wage falls with a mighty real wage rise of … 0.1%. Presumably journalists at the AFR all handed back the 1.5% wage rise their own sector of information, media and telecommunications recorded in the quarter…

It’s taken a near-decade of wage stagnation and a couple of years of real wage collapses before we’ve finally seen policy and institutional processes used to give workers at least a temporary bump in wages growth. Amazing what can be done if governments make an effort.