One of the most difficult things about moving to and working in a new country is gaining an understanding of your level of salary package compared to your home country. Economic, Industry, taxation and affordability factors can all see your wage change quite considerably when you begin work in Australia.

It wasn’t that long ago that Australian wages growth was so high that it threatened to derail the economy.  Annual wage growth has stagnated particularly over the past five years where wage growth has been hovering around an annual growth rate of 2%.  Wages growth of 4% is considered to be the norm in established Western economies.

This slowing of wage growth is a product of many factors.

The Australian workforce was once highly unionised. However, today as little as 10% of the Australia workforce has Union representation.  This lack of representation combined with the introduction of enterprise bargaining laws has made it difficult for workers to approach broader industries regarding significant wage growth.

This change in working conditions is coupled with game changing developments in the economy which perhaps could not be foreseen. One such development is the rise of the gig economy in the form of Uber, Airtasker and many similar enterprises which has seen many workers prepared to work for less than what would be considered award rates.  Another huge development has been the casualisation of the workforce. Around 4% of the Australian workforce now work for labour-hire companies and as such are paid casual rates only when they are hired to work.  Additionally, job security for many younger workers is a thing of the past with some companies hiring workers on short term contracts with no security of tenure.

These changes have been driven in some respect by employers who have moved to cut wage costs wherever possible.  Large corporations have moved many processing and tele-marketing functions offshore where labour costs are lower. In general, employers have resisted moves for wage rises in line with the cost of living citing international competitiveness as a key reason to keep costs low.

These varies changes in the Australia economy have seen wage growth slow quite dramatically.

As a result the governor of the Reserve Bank of Australia has now flagged slow wage growth as a major impediment to the health of the economy.  Slow wage growth causes a lack of disposable income which results in less consumer demand and a slower economy.

The implications in the long-term for the Australia economy could be quite dire as low labour costs lead to lack of innovation and perhaps, ironically, in the long run a lack global competitiveness.

The Australian Council of Trade Unions (ACTU) is calling for some changes to be made to working arrangements which will help to address some of these issues.  In particular they are calling for:

  • Same job same pay arrangements for hire company workers
  • Restrictions on employers hiring casual employees for long terms
  • The prevention of employees being hired on a subcontractor basis  when for all intents and purposes they are employees
  • Multi-employer bargaining agreements for small workplaces

The issues surrounding wage growth for the Australian economy are clear and this is something you should ultimately consider when seeking employment in Australia.

How Governments, Employers, Unions and the Reserve Bank of Australia manage to facilitate sustainable real wage growth in the coming years will ultimately contribute to the health of the Australian economy.

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