Australia's Wage Flaw Exposed By Fair Work Decision
One important issue in Australia is the 5.75% increase in wages for 20% of workers. This is a significant economic matter.
The lowest paid workers were going to get more money, which is good. But businesses will complain because they have to pay more. The jobs market, inflation, and economy are not good.
The growth is the biggest in 41 years. Earlier, it happened in 1982 with a 7.1% spike. However, only a few people are directly influenced by this decision.
It's estimated that the cost will be nearly $13 billion per year. This includes a total wage cost of over $1.1 trillion.
It's not a big increase altogether. However, some employers will notice the change. People who get the raise might end up with less money after expenses.
No one wins, everyone may lose.
The main issue is if the Reserve Bank will be influenced by it. The increase could add about 0.1% to wages growth.
This means that the wages could grow up to 4% by the end of this year, according to the Reserve Bank's forecast.
The RBA board will talk about the increase and its effect on the economy next Tuesday. The inflation data from this week raises the possibility of another interest rate increase.
The issue here is the economy and the policymakers. The real problem is the decrease in Australian productivity growth.
People who earn low wages will receive a wage increase of 5.75%. This will cause inflation to increase, and many will have less money to spend.
Poor productivity has been a problem for a long time. This causes economic problems. We cannot ignore this issue.
In September 2016, the new RBA governor, Philip Lowe, talked to the House of Representatives economics committee. He said that making reforms to increase productivity was very important. These changes would help everyone in Australia.
He said that focusing on productivity growth is the only way to return to our previous rate of growth in living standards.
Lowe spoke in parliament last week, it could be his final appearance. He said that productivity is still the problem.
He said that nominal wage growth doesn't cause inflation. The problem is actually weak productivity growth.
Australia has not seen any increase in average output per hour worked for three years. This means there has been no productivity growth. This could be an issue.
Not lifting productivity is not only the federal parliament's fault. Both sides of politics have some responsibility.
Business leaders talk about improving productivity but do not invest in research. This stops their talk from becoming action.
Every business wants a tax concession or a subsidy. It should be part of their regular operations.
Unions want more money but aren't suggesting ways to do more work.
People who vote are liking more and more the left and right populists who blame others instead of having uncomfortable ideas. They don't want things to change.
Failing has a consequence. The cost can't be covered with a minimum wage increase.
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