Wage growth remains stuck around historically low levels, with workers receiving annual pay increases averaging 2.3 per cent.
- The ABS wage price index rose 0.5pc in the March quarter, below analysts forecasts centred on 0.6pc
- Annual wage growth was stuck at 2.3pc for the third quarter in a row
- Health care and social assistance had the biggest annual pay increase of 3pc, construction and media and telecommunications the lowest at 1.8pc
The Bureau of Statistics Wage Price Index (WPI) rose 0.5 per cent over the first three months of the year, the same growth as the December quarter, and slightly below the typical economist forecast of 0.6 per cent.
ABS chief economist Bruce Hockman said wages growth had remained stagnant for nine months.
“Annual wages in seasonally adjusted terms grew 2.3 per cent for the third quarter in a row,” he said.
“The main contributors to growth over the quarter were regularly scheduled wage rises in the healthcare and social assistance and education and training industries, as was the case in the previous March quarter.”
However, defying recent trends, public sector wage rises in the first quarter were lower than private sector pay increases.
“The public sector recorded its slowest quarterly growth in 19 years, while the private sector saw the strongest annual growth in four years,” observed ANZ senior economist Catherine Birch.EMBED:WPI vs EBAs
While wages growth remains historically low, the Asia-Pacific economist for global jobs website Indeed, Callam Pickering, observed that low inflation meant that Australian workers were at least seeing a rise in living standards.
“The one silver lining in the latest wage report is that real wages rose by 0.9 per cent over the past year,” he wrote in a note on the data.
“That would normally be considered rather disappointing but these aren’t normal times.
“Instead, real wages are now at their highest level since December 2012. In an ideal world though we’d prefer that to occur via higher wages rather than low inflation.”
However, research from left-leaning think tank The Australia Institute’s Centre for Future Work indicates that actual income growth may be even weaker than the ABS statistics suggest.
The centre’s director Jim Stanford said his analysis of tax office data for the financial years 2012-13 to 2016-17 shows wages rose just 1.7 per cent per annum, versus a 2.2 per cent increase in the WPI, and were also below inflation of 1.9 per cent.
“The WPI series makes adjustments for changes in the composition of employment, in order to create a hypothetical fixed ‘bundle’ of jobs,” Dr Stanford said.
“As a result, the impact of changes in job quality (such as the rise of part-time work, casualisation, and ‘gigs’) is not reflected in the WPI results.
“In the tax data, in contrast, all of these factors affect the evolution of realised average wages and salaries reported per tax-filer.”
The centre’s study found that wage rises were also not evenly distributed across the nation — real wages actually fell by 3 per cent in Queensland and 5 per cent in Western Australia over the four-year period studied, with regional areas dominating those worst affected.
The latest ABS WPI release shows this trend has not stopped, with Western Australia recording the lowest through-the-year wage growth of 1.6 per cent, while Victoria recorded the highest of 2.7 per cent.
Health care has a pulse, construction hammered
In unadjusted terms, wage growth was strongest in the health care and social assistance sector, at 3 per cent, while it was weakest in the construction and media and telecommunications industries, at 1.8 per cent over the past year.EMBED:WPI by industry
The most recent detailed employment figures from earlier this year show the construction sector shed almost 50,000 jobs over the 12 months to February, as Australia’s residential building boom turned to bust.
Industries where jobs are being lost tend to have weaker pay outcomes, as there are more workers competing for the available positions.
Conversely, sectors that are creating jobs tend to have higher pay increases — public administration and safety (164,200) and professional, scientific and technical services (104,800) had the largest employment gains over the past year.
While unemployment has remained quite steady at 5 per cent — a fairly low rate by the standards of the past few decades — underemployment has stayed stubbornly high at 8.2 per cent, with many workers seeking more hours than they currently receive from their employer.EMBED:WPI vs labour market capacity
Mr Pickering said there needs to be a significant improvement in the proportion of people wither without work or without enough hours — underutilised workers — before wages pick up.
“While the unemployment rate, at 5 per cent, is reasonably low, it is actually the underutilisation rate, at 13.2 per cent, that is key going forward,” he said.
“That needs to ease towards 12 per cent before wage growth of 3 per cent or higher is likely. That won’t happen overnight nor is it likely within the next year.”
Economist Marcel Thieliant from Capital Economics is even more pessimistic, noting that improvements in the labour market over the past year have done little to lift wage growth.
“The unemployment rate fell to an eight-year low in the first quarter and the underutilisation rate, which includes employees that would like to work additional hours, plunged by 1 percentage point over the past year,” he observed.
“What’s more, we think that the labour market won’t remain as tight as it is now as jobs growth softens. The upshot is that wage growth may start to weaken again before long.”