The Times Australia
The Times World News

.
The Times Real Estate

.

Despite record job vacancies, Australians shouldn't expect big pay rises anytime soon – and here's why

  • Written by David Peetz, Professor Emeritus, Griffith Business School, Griffith University
Despite record job vacancies, Australians shouldn't expect big pay rises anytime soon – and here's why

Something extraordinary has been happening for Australians seeking jobs in the past few months.

The number of vacant jobs on offer has soared to a new all-time high.

Figures released in budget week show there were almost twice as many jobs available in February this year – 423,500 – as in February 2020, before COVID arrived on our shores. And the number of Australians satisfying the ABS that they were “unemployed” was just 563,300, the lowest in 13 years.

More job vacancies for each unemployed person than ever before

Seasonally adjusted. ABS labour force, job vacancies[1]

What this means is that in February 2022 there were only 1.3 unemployed people chasing each vacant job, the smallest ratio on record — down from three unemployed people for each vacancy in 2020, five for each vacancy in 2000, and seven in 1990.

Number of unemployed people for each vacancy

ABS Job vacancies, Labour force. ABS Job vacancies, Labour force[2]

The unemployment rate is now just 4%, and is budgeted to fall to 3.75%[3] within months, taking it to a five-decade low.

Our wages aren’t keeping up

Yet wages growth in Australia remains astoundingly low. Now 2.3%[4], it has been below 2.5% for seven years.

The Reserve Bank says it is targeting wages growth of “three point something[5]”. It has failed to achieve it for the best part of a decade.

The low wage growth, compared with unusually high price growth, means wages growth has slipped 1.2% below price growth over the past year. That means what Australians are earning isn’t keeping up with rising prices.

Budget forecasts that don’t make sense

The budget anticipates price growth of 4.25%[6] in 2021-22 alongside wages growth of 2.75%, meaning Australians’ buying power will shrink even more, by 1.5%.

In the Budget year, 2022-23, it predicts an uptick in wages growth to 3.25% alongside a dip in price growth to 3%, meaning wages would claw back 0.25% of the buying power they lost.

Read more: Why there's no magic jobless rate to increase Australians' wages[7]

And here’s where this year’s budget forecasts don’t make sense.

It forecasts that what we’re seeing right now – price rises outstripping wages growth – is suddenly going to flip: that we’re about to see a slowdown in price inflation, alongside an acceleration in wages growth.

Here’s the odd part of it. On one hand, the Treasury is telling us it expects the unemployment rate to fall further below the “non-accelerating-inflation rate of unemployment[8]” – which by definition means inflation would accelerate. Yet the budget predicts inflation will fall.

It’s a strange and unexplained departure from conventional forecasting.

Employers get to pick what they pay

If price growth merely stays at its current level of 3.5%, the budget’s forecast of 3.25% wages growth means real wages will fall.

And, given most of the budgets since 2014 have overestimated wages growth[9], it is worth considering what would happen if wages growth has been overestimated once again: real wages would fall still further.

Something weird is happening in the labour market.

With very few unemployed people available for each vacancy, employers ought to be offering higher wages to compete for workers.

But the concept of “monopsony[10]” gives us an idea why that’s not happening.

The core idea of monopsony is that employers can choose[11] (within constraints) the wages they pay their workers.

Read more: 'Can-do capitalism' is delivering less than it did. Here are 3 reasons why[12]

If this sounds obvious, I apologise, but it’s very different to the perfect competition[13] model of the labour market once loved by economists, in which wages are set by bargaining in a two-sided market.

When employers offer low wages, they can pay the price with higher staff turnover, unfilled vacancies, absenteeism or poor product quality.

But they still feel they can get away with paying low wages, and leaving many vacancies unfilled. And other employers feel they are forced to keep wages low, due to competing against low-price firms[14] and because their immediate customers (such as supermarkets) insist on low prices.

These employers are able to choose to pay lower wages than in the past because workers are less powerful and their collective bargaining power is less effective than it once was.

Power imbalances keep wages in check

Work is insecure. Many workers face casual employment, contracting, labour hire, franchising or underemployment. Trade union membership has plummeted.

Only 12.7% of male workers are in a trade union in their main job, down from more than 50% at the start of the 1980s. Just 15.9% of women are, down from 43%.

Industrial disputes are at record lows partly because industrial laws have changed, making it extremely difficult for unions to strike for higher wages, and easy for employers to get around them.

Don’t expect any surges in real wages, no matter how tight the labour market is, while this new structure remains.

References

  1. ^ ABS labour force, job vacancies (www.abs.gov.au)
  2. ^ ABS Job vacancies, Labour force (www.abs.gov.au)
  3. ^ 3.75% (public.flourish.studio)
  4. ^ 2.3% (www.abs.gov.au)
  5. ^ three point something (www.rba.gov.au)
  6. ^ 4.25% (budget.gov.au)
  7. ^ Why there's no magic jobless rate to increase Australians' wages (theconversation.com)
  8. ^ non-accelerating-inflation rate of unemployment (cdn.theconversation.com)
  9. ^ overestimated wages growth (www.theguardian.com)
  10. ^ monopsony (obamawhitehouse.archives.gov)
  11. ^ choose (www.brookings.edu)
  12. ^ 'Can-do capitalism' is delivering less than it did. Here are 3 reasons why (theconversation.com)
  13. ^ perfect competition (www.economicsonline.co.uk)
  14. ^ competing against low-price firms (press.anu.edu.au)

Read more https://theconversation.com/despite-record-job-vacancies-australians-shouldnt-expect-big-pay-rises-anytime-soon-and-heres-why-180416

The Times Features

How to Protect Your Garden Trees from Wind Damage in Australia

In Australia's expansive landscape, garden trees hold noteworthy significance. They not only enhance the aesthetic appeal of our homes but also play an integral role in the local...

Brisbane Homeowners Warned: Non-Compliant Flexible Hoses Pose High Flood Risk

As a homeowner in Brisbane, when you think of the potential for flood damage to your home, you probably think of weather events. But you should know that there may be a tickin...

Argan Oil-Infused Moroccanoil Shampoo: Nourish and Revitalize Your Hair

Are you ready to transform your hair from dull and lifeless to vibrant and full of life? Look no further than the luxurious embrace of Argan Oil-Infused Moroccanoil Shampoo! In a...

Building A Strong Foundation For Any Structure

Building a home or commercial building can be very exciting. The possibilities are endless and the future is interesting. You can always change aspects of the building to meet the ...

The Role of a Family Dentist: Why Every Household Needs One

source A family dentist isn’t like your regular dentist who may specialise in a particular age group and whom you visit only when something goes wrong. A family dentist takes proa...

Benefits of Getting an Online Medical Certificate

Everyone has experienced it. Rather than taking a break, you drag yourself to the doctor's office, where you have to wait in lengthy lines, and then you have to hurry to get that...

Times Magazine

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

How AI-Driven SEO Enhancements Can Improve Headless CMS Content Visibility

Whereas SEO (search engine optimization) is critical in the digital landscape for making connections to content, much of it is still done manually keyword research, metatags, final tweaks at publication requiring a human element that takes extensiv...

Crypto Expert John Fenga Reveals How Blockchain is Revolutionising Charity

One of the most persistent challenges in the charity sector is trust. Donors often wonder whether their contributions are being used effectively or if overhead costs consume a significant portion. Traditional fundraising methods can be opaque, with...

Navigating Parenting Arrangements in Australia: A Legal Guide for Parents

Understanding Parenting Arrangements in Australia. Child custody disputes are often one of the most emotionally charged aspects of separation or divorce. Parents naturally want what is best for their children, but the legal process of determining ...

Blocky Adventures: A Minecraft Movie Celebration for Your Wrist

The Minecraft movie is almost here—and it’s time to get excited! With the film set to hit theaters on April 4, 2025, fans have a brand-new reason to celebrate. To honor the upcoming blockbuster, watchfaces.co has released a special Minecraft-inspir...

The Ultimate Guide to Apple Watch Faces & Trending Wallpapers

In today’s digital world, personalization is everything. Your smartwatch isn’t just a timepiece—it’s an extension of your style. Thanks to innovative third-party developers, customizing your Apple Watch has reached new heights with stunning designs...

LayBy Shopping