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| Rise up and demand pay increases, Reserve Bank chief urges workers | Rise up and demand pay increases, Reserve Bank chief urges workers |
| (7 months later) | |
| Philip Lowe says economy is being held back by low wage growth and that staff should have confidence to ask for higher pay | |
| Gareth Hutchens | |
| Mon 19 Jun 2017 09.19 BST | |
| Last modified on Mon 19 Jun 2017 11.21 BST | |
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| The governor of the Reserve Bank has called on workers to start demanding large pay rises from their bosses. | The governor of the Reserve Bank has called on workers to start demanding large pay rises from their bosses. |
| In a remarkable statement for a central bank chief, Philip Lowe said Australia’s economy was suffering a “crisis” in wage growth, and workers ought to realise the relatively low unemployment rate meant they could start asking for a larger share of the nation’s economic pie. | In a remarkable statement for a central bank chief, Philip Lowe said Australia’s economy was suffering a “crisis” in wage growth, and workers ought to realise the relatively low unemployment rate meant they could start asking for a larger share of the nation’s economic pie. |
| Lowe told a conference at the Australian National University on Monday the labour market was in better shape than some critics were suggesting. | Lowe told a conference at the Australian National University on Monday the labour market was in better shape than some critics were suggesting. |
| “The crisis is really in real wage growth,” he said. | “The crisis is really in real wage growth,” he said. |
| He said despite the relative strength in the labour market, too many workers were putting job security ahead of pay rises, partly because they were worried about competition from “robots” and “foreigners”. | He said despite the relative strength in the labour market, too many workers were putting job security ahead of pay rises, partly because they were worried about competition from “robots” and “foreigners”. |
| “When any of us feel like there is more competition out there you’re less inclined to put your price up,” he said. “People value security and one way you can get a bit more security is not to demand a wage rise.” | “When any of us feel like there is more competition out there you’re less inclined to put your price up,” he said. “People value security and one way you can get a bit more security is not to demand a wage rise.” |
| The labour market in economies such as the US, Germany, the UK and Japan was tighter than people thought, he said, as it was in Australia, and he hoped it would re-energise workers to demand more compensation. | The labour market in economies such as the US, Germany, the UK and Japan was tighter than people thought, he said, as it was in Australia, and he hoped it would re-energise workers to demand more compensation. |
| “At some point, one imagines that’s going to lead to workers being prepared to ask for larger wage rises,” he said. “If that were to happen it would be a good thing.” | “At some point, one imagines that’s going to lead to workers being prepared to ask for larger wage rises,” he said. “If that were to happen it would be a good thing.” |
| Last week the unemployment rate fell to a four-year low of 5.5%, in seasonally adjusted terms, and remained steady in trend terms, at 5.7%. | Last week the unemployment rate fell to a four-year low of 5.5%, in seasonally adjusted terms, and remained steady in trend terms, at 5.7%. |
| The trend underemployment rate, which is a quarterly measure of employed persons wanting more hours, increased from 8.7% to a historical high of 8.8% between February and May 2017. | The trend underemployment rate, which is a quarterly measure of employed persons wanting more hours, increased from 8.7% to a historical high of 8.8% between February and May 2017. |
| Under-employment has now risen for the six consecutive quarters. | Under-employment has now risen for the six consecutive quarters. |
| Combining the 5.7% trend unemployment rate with the 8.8% trend underemployment rate, the underutilisation rate remained at 14.5% in May. | Combining the 5.7% trend unemployment rate with the 8.8% trend underemployment rate, the underutilisation rate remained at 14.5% in May. |
| Lowe challenged the idea on Monday that the decline in full-time employment and growth in part-time employment was a bad thing. | Lowe challenged the idea on Monday that the decline in full-time employment and growth in part-time employment was a bad thing. |
| “This distinction between part-time and full-time employment is old fashioned – there are a lot of people who work part-time who actually want to work part-time,” he said. | “This distinction between part-time and full-time employment is old fashioned – there are a lot of people who work part-time who actually want to work part-time,” he said. |
| “The fact that we’re working a few less hours on average is probably a good thing, not a bad thing or a sign of weakness.” | “The fact that we’re working a few less hours on average is probably a good thing, not a bad thing or a sign of weakness.” |
| Lowe’s comments come after data showed the share of national income going to Australian workers was close to a 50-year low. | Lowe’s comments come after data showed the share of national income going to Australian workers was close to a 50-year low. |
| Bureau of Statistics data this month showed labour’s wages share of gross domestic product has fallen to 51.5%, down from 54.2% in the third quarter of last year. At the same time, the profit share of GDP has risen from 24.5% to a five-year high of 27.5%. | Bureau of Statistics data this month showed labour’s wages share of gross domestic product has fallen to 51.5%, down from 54.2% in the third quarter of last year. At the same time, the profit share of GDP has risen from 24.5% to a five-year high of 27.5%. |
| Paul Dales of Capital Economics said Australian workers have not seen “one cent” of the extra income generated by recent soaring commodity prices because “it’s all gone into the pocket of business”. | Paul Dales of Capital Economics said Australian workers have not seen “one cent” of the extra income generated by recent soaring commodity prices because “it’s all gone into the pocket of business”. |
| The Australia Institute, a progressive thinktank, using a slightly different measure, said recently that the proportion of national economic output paid to workers was at an all-time low of 46.2% of GDP. | The Australia Institute, a progressive thinktank, using a slightly different measure, said recently that the proportion of national economic output paid to workers was at an all-time low of 46.2% of GDP. |
| Figures last month showed Australian wages have stagnated at a record low, growing a just 1.9% annually. | Figures last month showed Australian wages have stagnated at a record low, growing a just 1.9% annually. |
| With the cost of living rising at 2.1%, it means real wages have declined by 0.3% over the past year. | With the cost of living rising at 2.1%, it means real wages have declined by 0.3% over the past year. |
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