UPDATE/POSTDATE: How bizarrely out of it economics has become is triple underscored by the front-page story in The Oz: Peril for budget in wages slump. This is seen as a problem, which it is, but not as a cause and effect which in large part it also is:
Workers in the private sector are going backwards financially as increases in their pay fall further below inflation, highlighting the risk to the government’s budget forecasts, and leaving only public sector workers making gains.
Overall wages growth remains stuck at a record low of 1.9 per cent, saved from falling further only by the success of public sector unions in winning wage increases that have averaged 2.4 per cent. Private sector growth fell to 1.8 per cent.
The unfortunate fact is that public spending – you know, Keynesian-type stimulus spending plus other 25-watt brainwaves from the PM – is making us poor. We are being sunk under a sea of waste – see the NBN for further details. That the vaudeville team of Malcolm and Morrison, along with their Treasury advisors, cannot understand what’s wrong is par for the course. When productivity falls so do real wages, at least for those in the market economy. It’s not the deficit per se that matters but the way governments blow money at outrageous rates. Unless that stops we will just continue to go nowhere but at increasingly faster rates.
Now back to the original post.
The fact of the matter is that no one using modern economic theory could explain this: PAY GAP: Australian wages growth is stuck at record lows, and running behind inflation. Certainly you don’t find an explanation in the story which has only this:
With wages currently growing at an annual pace of less than 2%, and given evidence that it’s been hard to stoke wage pressures in other developed nations even with recent improvements in labour market conditions, it’s little wonder that some remain sceptical about a sharp turnaround in wages, particularly to levels back above 3%.
“The fact that wage growth is stuck in the doldrums comes as little surprise given the deterioration in Australia’s labour market, with the jobless rate climbing from 5.7% to 5.9%,” said Tom Kennedy, economist at JP Morgan, following the release of the report.
“We expect wage growth to remain unimpressive for some time given significant slack remains in the labour market.”
The problem has been obvious for almost a decade but only for those who have been classically trained. And that they would even want “to stoke wage pressure” just shows how far off the beam they are.