Jobs boom defies stagnant wage growth

While CEOs of Australia’s top 100 ASX-listed companies saw their pay jump an average 12.4 percent last financial year (according to the latest data by the Australian Council of Superannuation Investors – ACSI), the recent jobs boom is unlikely to deliver higher wages for everyone else. Without any underlying pressure on wages to nudge higher in the foreseeable future, BIS Oxford Economics doesn’t expect wages growth to do more than keep pace with inflation at around 2.00 percent for some time to come.

Not even ‘better than expected’ jobs growth recorded in August, which saw 44,000 jobs (33,700 full-time and 10,200 part-time) added to the economy, did much to give wages growth a much needed leg up. What’s currently offsetting an uptick in the workplace participation rate experienced in August – with the jobless rate near a six year low of 5.3 percent – explains BIS Oxford Economics’ Sarah Hunter are some underlying structural shifts playing out in the local market.

The three biggest drivers of dampening wage growth identified by Hunter include A) falling rates of unionisation, B) a low pace of productivity growth, and C) the growing casualisation of the workforce – which has seen the underemployment rate remain at elevated levels.

Unsurprisingly, there’s a direct correlation between the rise in part-time work and the slowing rate full-time employment. For example while there are more people aged 25-64 in employment now than at any time in our history, much of this can be attributed to the growth of women doing part-time work.

While the percentage of women aged 25-64 who are working has risen from 68.1 percent at the start of 2011 to 71.1 percent now, in the same period the percentage of men working has fallen from 84 percent to 83.2 percent.

Wage growth Shanghai’d by underemployment

Regarded as a key measure of labour market slack, underemployment is a barometer of wage growth, and at 8.1 percent it doesn’t bode well for a meaningful rise any time soon. However, what’s encouraging is the ongoing decline in underemployment, particularly in Victoria, and over time, this could signal a turning point for wage inflation.

Based on ABS data, NSW recorded the largest monthly jobs increase in seasonally adjusted terms, with a gain of 43,200, while the largest decrease was in South Australia (down 8,400). Meantime, the unemployment rate fell in NSW, Tasmania and Victoria, but increased in WA and Queensland.

But despite flat-lined wage growth, strong equity markets led to an 18 percent growth in executive bonuses, while one in three ASX-100 CEOs received 80 percent of their maximum bonuses (median payout was 70.5%). Given the underlying weakness in wage growth, ACSI’s CEO, Louise Davidson says board decisions to pay large bonuses merely for hitting budget targets, suggests they’ve lost sight of the link between a company’s social licence and the expectations of communities and investors.