federal politics
3 Mar 2008
Waging War
In the wake of WorkChoices, how exactly will the Rudd Government keep a lid on wage inflation? Mark Bahnisch investigates the options
Declaring war on a phenomenon has become something of a cliché in political rhetoric. However, such graphic metaphors have their uses. They signal seriousness of intent, and sometimes a desire to mobilise the community in pursuit of a common goal.So it is with the Rudd Government's war on inflation.
But it doesn't look as if all the combatants on the wages front are marching in lockstep. Kevin Rudd himself has set the tone with his recent announcement that pollies' wages will be frozen until July next year. Big business, while preaching spending cuts all round, doesn't look likely to fall in - with the Business Council of Australia's new president, Greg Gailey, intimating to ABC radio that pay restraint among executives on million dollar packages was unrealistic as their remuneration is "a response to market demands".
Market forces, as Gailey understands, are a big part of the problem. Although questions could be posed to economists about how central wage increases actually are to inflationary pressures, there's no doubt they play a role, with a tight labour market seeing substantial increases spreading to the retail and hospitality sectors, according to the latest ABS figures. But while Ministers may be reloading fiscal policy as part of its economic firepower, the legacy of two decades' worth of industrial relations deregulation means that there are big limits to how much the government can mould wages policy.
The Government - or more properly the Fair Pay Commission - rather bizarrely left in place as part of Labor's transitional arrangements for the repeal of WorkChoices, can influence minimum wages, and thus, the remuneration of the lowest paid in the community. The FPC's chair, Professor Ian Harper, has signalled that he will be taking inflation into account when next adjusting the minimum wage.
Wage restraint, it seems, doesn't extend to Professor Harper's own remuneration. Blogger Ken Lovell at Road to Surfdom analyses the increase in pay for Harper's part time gig from $81,445 to $119,830, rightly casting a skeptical eye on the process and the justification.
So, it seems that parliamentarians and the low paid, if not CEOs and those who determine the wages of the low paid, are both going to see real wage cuts this year. This hardly constitutes an equitable outcome, nor does it give much hope that wage restraint will be meaningful across the whole workforce.
Prior to Paul Keating's reforms in 1993, it was possible for the Industrial Relations Commission to enforce wages policy, but it's been a long time since the total wages bill has been closely shaped by government action rather than market forces. Collective bargaining, with an emphasis on productivity tradeoffs, still has the potential to counter wages inflation, but the politics of last year's campaign meant that the transition away from a focus on individual contracts under Labor's regime will be a tardy one.
As Deputy Prime Minister Julia Gillard has argued, the real pressure on wages isn't coming from 16-year-olds getting eight rather than seven bucks an hour for flipping burgers. Nor is it just the mining sector. It's a direct result of skills shortages and a tight labour market where employers are bidding up wages, and a significant number of employees are shopping around for a higher paying job.
Kevin Rudd may be attempting - with his insistence on keeping his tax promises for the low and middle income brackets - to enshrine a wages/tax tradeoff by stealth, along the lines of the Hawke/Keating era Accord. But his problem is that much wages growth is taking place in the non-unionised sectors of the economy, and there's no realistic prospect of doing a corporatist style deal with anyone. So what the Government has left is rhetorical jawboning.
Nobody seems to have pointed out, though, that it takes two to tango in wage negotiations. Employees may have more of an eye on the main chance rather than on the national interest (and who can blame them?) but employers bear a large responsibility for an approach to recruitment and retention that focuses solely, or largely, on cash. There's a lot of good academic research around that suggests that non-monetary factors - like autonomy at work, job satisfaction and work/life balance - are potentially more powerful motivators for employees than oversized pay rises. If the big end of town isn't going to take a pay cut, it might profitably focus on these findings, and Julia Gillard might consider some creative policy incentives. Then the poor might not have to take the brunt of the anti-inflationary pain.
It might not have the military cachet of war metaphors, but a happier workforce and less pressure on interest rates might be a peace settlement everyone can love.
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Mark, do you think somebody might one day discuss inflation in terms of it’s actual causes rather than it’s effects?
The excessive creation of money and the undesireable structural changes it causes to the real economy, the misallocation of capital and other production factors arising from excessive credit and money creation i the way we will wirness in the unfolding and current threatening credit crisis which we all face in Australia are all very much the function of the failure of our successive governments over the years to willfully address the true causes of inflation.
It is an obscenity of government to pretend to be so incapable of understanding inflation, it’s causes and it’s effects, that they will attempt to force a "wage freeze" on the cost of labour, which is the only production factor which really is justified to rise as an offset against the true cost of inflation and which is the direct culpa of the government which arguably is the greatest cause AND beneficiary of inflation.
George Vickers
How exactly does one willfully address something? Never mind the split infinitive, but:
wilfully
adverb
in a willful manner; "she had willfully deceived me"
And willful —Synonyms 1. volitional. 2. intransigent; contrary, refractory, pigheaded, inflexible, obdurate, adamant.
I could understand if you said successive governments have wilfully ignored the causes of inflation. But that they have failed to wilfully address the causes of inflation leaves me wondering what on earth you mean.
Also, it’s with an apostrophe is a shortened version of IT IS. The word you are looking for is its, no apostrophe. It’s all very well trying to sound learned by chucking in Latin phrases (culpa), if you can’t use the ‘umble English word its correctly it doesn’t actually make you look smarter.
Well, you obviously think you look a whole lot smarter by posting that rant twice!
It’s good to see people so dedicated to the proper use of our English grammar.
Is the word "culpa" really a "latin phrase"?
I notice your rant includes words like "1. volitional. 2. intransigent; contrary, refractory, obdurate" which I always thought were derived from Latin. Of course that can’t be the case because that would mean you used them just to make yourself "look smarter"!
Thanks for the lesson rebekkap, I’ll try to "use the ‘umble English word its correctly" in future.
George Vickers
Is’nt stagflation like in the U.S a far more serious problem than a bit of inflation?
It’s not just the matter of printing more money or even reaching parity with the U.S dollar that is of concern.
Because then we can’t sell stuff overseas because we are too dear and uncompetitive. But foreign investment will flock here and we will no longer own anything in this country, maybe not even this country any more.
It is well known that many soveriegn states have state funded banks and institutions buying up all over the place using the capitalist ethic to further their imperialistic aspirations.
So our workers are being offered extra super entitlements, maybe up to 15% of earnings into super funds each month.
Good, great, why not 20%.
Originally 1/3 was supposed to be employer contribution, 1/3 government, and 1/3 (voluntary) employee contribution to their super.
The governemnt put a ceiling on their contribution at about $1500 per annum! The employee was never obliged to pay in, so who got left to contribute the lion’s share, yes, the muggins employer.
So folks employers on top of wages will have to pay soon 12% and eventually 15% extra in super!
Who do you think really ends up paying for all this generosity? us the consumer, that’s who.
So good old Titanic was going great guns til it hit the iceberg too, so what do we do? instaed of manning more lifeboats we order full steam ahead and change the captain.
She’s not going to take much more of this captain…. beam me up Scotty.
For the last decade and a half - when executive salaries started their exponential acceleration away from the rest of ours - I have advocated - with no significant effect that rises in the (now) minimum wage be tied to the yearly increase in remuneration of the average of the increase for the highest paid ten executives. Could be interesting?