Very Good Pay for Low Productivity

A topic I’ve been thinking about involves wages, labour and productivity.

Particularly in Australia.

Bureau of Statistics data suggests that wage inflation is benign.

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release

I am seeing the contrary. A range of people from hospitality workers, truckers to tradies being paid above award rates for their labour.

Sorry folks, but house cleaners are making $55 per hour. That’s the same as a registered nurse.

On the subject of labour, it is anecdotally evident that we have a shortage of labour. Whether that is spliced and framed between those willing and not willing to work (either subsidised or otherwise), available labour is scarce.

I’d like to be corrected with this next statement but productivity (any type that you wish to look at) is significantly lower than it was 20 or 30 years ago.

Certainly software has helped increase one type of productivity but generally in Australia, I think the drop in productivity commenced from the moment Bill Kelty became the Secretary of the ACTU in 1983.

The costs associated with hiring and keeping employees coupled with the difficulty in firing staff has manifested it into a growing gravy train of complacency and lack of productivity.

Now, it has spread into a common work vernacular.

Why does it take 18 months to build 5km of highway ??

Australia is a one-speed economy.

Slow !

September 1, 2021

by Rob Zdravevski

rob@karriasset.com.au

More Immigration = Lower Wages = Being Competitive

It should be simple to understand.

When the labour market is tight, the price of that labour rises.

Australia along with other countries such as Norway, Netherlands and Switzerland all have low unemployment rates. They also have some of the highest average annual wages and minimum wages amongst OECD member countries.

Tight workplace capacity (whether that means offices, factories or other facilities) and a unionised workforce can also add to the cost of labour.

When people earn more, the prices of other products can afford to rise too, simply because rising disposable income means there is more demand for the staples and non-discetionary items.

But today, Australian business operators are complaining that the cost of paying staff is becoming a heavy burden and nationally, we do understand that high wages are making us uncompetitive. They are asking the government for help.

Government doesn’t control the price of labour, so they can’t actually manipulate this price directly. What is confusing furthermore, is that businesses are happy to benefit from the positives of a free market economy, yet they are not willing to accept the cost that comes from such capitalism.

What needs to be done? What help can government provide ?

I would like your comments too.

If  the labour market is tight, then open it up. Allow more immigration. Australia is so large we can easily fit 100 million people here. Make the labour market more competitive and its price will fall. More people will also send the cost of other products down. If there are more consumers, then supply will meet the demand and price equilibrium will weave its magic.

Government needs to take a stronger line on unions and labour contract employment reform. Employees need to be convinced that the statute law passed which governs our land will be steadfastly upheld. The honouring of these laws doesn’t really require the oversight nor lobbying of a union because the “checks and balances” of democracy, its electoral constituents and the Westminster parliamentary system already exist.

I think its time we spoke truthfully about why the cost of labour is high. The headline unemployment rate isn’t the only things that matters, although government seems to think this is the major topic that will keep them elected.

The United States, Spain, Italy & Korea all have higher unemployment rates, noticeably lower wages, export more product (in dollar value), comparatively similar sized GDP per capita and much larger populations.

 

 

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