Australia’s weird new Federal Budget that advocates rapid wages growth: a quick critical note on the commentary

Here, Greg Jericho joins with other mainstream economists in agreeing with the lead analysis of Jim Stanford’s Centre for Future Work, that LNP government’s Budget expectation (requirement) for wages growth is not happening and shows no prospect of happening.

Again the usual high quality info from Greg. But this time, the analysis about why and what might be done is quite shallow, even absent.

Greg’s statistical causation focuses on underemployment. There are other deep factors at play than competing statistical tendencies.  But what establishes and further enables underemployment, and what is its connection to unemployment?

Another deep factor in keeping wages low is the Fair Work Act 2009 systemic, repressive scheme of penalties against workers who seek to exercise their SOLIDARITY power to improve their wages or to improve their job security. The Turnbull government’s only major change to Labor’s own version of this anti worker, anti solidarity wage and conditions fixing regime in the FWA is the harsher penalties against construction workers, including their extension to workers and their unions who do work in association with construction.

This is because Labor’s regime for bargaining and national wage fixing is working perfectly well for employers, not workers, as it was designed to do. This is one of the essential planks of neoliberalism, or Labor’s “neolaborism”, that is not going away … yet.

It beggars belief that this government, and arguably an alternative Labor government, will change the FWA so that workers can help solve their weird wages problem in the macro economy.

The other factor in keeping wages low is the union movement’s failure, so far, to develop a significant strategy that will genuinely restore worker’s right to strike and other forms of collective action, that will include rights to deal with international competition on wages etc., include climate change transition as a bargaining issue, and put worker solidarity back into both minimum legal rights and the development of society.

Mixed up in all of this is the “little matter” of profits. The discussion about profits, or its absence, in Australia is pathetic. Not just the volume of profit, but also what profit is, the exploitation of humans and nature upon which it depends, and profit in relation to total investment, that is the combination of investment in machines, hardware, software development, etc and the workers who bring all of that to life through their labour. We cannot understand the significance of the “wages problem” without grappling with profits and investment. Traditionally, Keynesians are not very good at that. So, we turn instead to our potential as union activists to do it properly?

Author: Don Sutherland

I am a retired left wing and labour movement activist. Before that I worked for a long time in the Australian union movement in union education, Australian and international solidarity and organising. I am also active in Cuban solidarity, the SEARCH FOUNDATION, and promoting discussion, debate and action about green socialism based on workers control and social ownership.

5 thoughts on “Australia’s weird new Federal Budget that advocates rapid wages growth: a quick critical note on the commentary”

  1. It is hardly radical economics to say what Bill Mitchell says here: “Firms will not employ new labour, no matter how cheap it becomes, if they cannot sell the extra goods and services that would be produced.” Straightforward really but somehow such notions don’t seem to enter heads.
    “The claim that real wage cuts or growth retardation is necessary to stimulate employment is never borne out by the evidence… there is strong evidence that both employment growth and real wages growth respond positively to total spending growth and increasing economic activity. That evidence supports the positive relationship between real wages growth and employment growth”.

    1. Thanks Neale, I agree that the first part of Bills’s quote is pretty straightforward. I do have a problem, at this stage until I read his whole post, with the second part. First total income would include the 2 big ones, wages themselves and also profits going back to the owner(s). “Total spending growth” includes workers’ spending and bosses’ “investment”. Conflating these into totals can be misleading when talking about capitalism as the system. Each type has a different purpose in the quest for profit relative to investment. Generally, the higher the investment in both machines etc and the workers who are needed to run them, the lower the profitability. To get a rescue of the rate of profit or increase it there has to be an investment in machines etc accompanied by controls over and often reduction of wages. I think that’s how it works.

  2. The Budget reflects the current crisis in Capitalism, which is becoming more moribund, decedant and parasitic everyday. The contradictions between the productive forces of capitalist society and its production relations then grow sharper and deeper.

    1. I think the challenge for us to be able to show a)how (and whether) concepts like that are actually working in current 21st century capitalism to the great detriment of workers and nature, b) pose the situation in plain language that helps non economists like you and me understand and grab hold of the issues, c) elevate the discussion about the alternatives that emerge in day to day struggles so that they can be pursued by workers rather than just heroic leaders.

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