The new data confirms an old adage: The best way to get a big pay raise is probably to find a new job.
- Seek figures show that advertised wages are growing much more strongly (4.1%) than the wage price index (2.6%).
- Design and architecture, IT and trades workers are seeing the biggest pay rises, public sector employees the smallest.
- New economic research from e61 shows the under-35s bear the brunt of stagnant wages
Figures from Australia’s largest job market, Seek, which currently hosts more than 200,000 job advertisements a month, show advertised wages rose 4.1 per cent over the year to July.
Pay rates offered for jobs on the platform rose 0.4 percent in July, a similar rate to the previous two months, putting annualized wage growth at a rate just below below 5 percent.
That’s much stronger than the official Australian Bureau of Statistics wage price index, which showed annual wage growth of just 2.6 per cent for the year to June.
Seek senior economist Matt Cowgill said it’s no surprise that advertised pay rates are growing faster than those of people staying in the same job.
“I would expect to see advertised wages respond more and more quickly to changes in economic conditions and broader changes in the labor market,” he told ABC News.
“When things get worse, as they did during 2020, [employers are] they are not going to reduce the salary of their current staff, but they might be much more willing and able to reduce, or at least restrict, the salary increase they offer to new employees. And that’s what we saw in our data.
“And similarly, as the job market recovered and things started to pick up through 2021, advertised wage growth rose much higher and faster than overall wages and salaries as measured by ABS.”
Cowgill said there’s no guarantee that announced wage growth will eventually be matched by wage growth for all workers, but it’s a positive sign.
“The uptick in announced wage growth that we have seen makes me hope that the wage price index will continue to pick up,” he said.
Other new economic research casts doubt on how much wages will rise for those who switch jobs, and wage levels across the board.
The paper, produced by the recently formed economic think tank e61, found that the rate of job turnover in the economy each year had fallen markedly.
“The probability of the average Australian worker changing jobs (or ‘job-to-job transition rate’) has fallen from 11.3 per cent in the mid-2000s to 8.5 per cent more recently,” he observed. the investigation.
“The rate of transition from one job to another has increased during the recent labor market recovery, but remains well below the average rates seen before the GFC. [global financial crisis].”
This decline is not only directly holding back wage growth, because people who change jobs tend to receive larger wage increases, but also economy-wide productivity growth that could contribute to higher wages.
“The propensity to reallocate labor to more productive firms has decreased,” the e61 researchers noted.
“This decline in reallocation to improve productivity may account for a quarter of Australia’s productivity slowdown.”
Young Australians left worse off
Furthermore, the decline in job changes is particularly detrimental to young workers.
“The wage increase for changing jobs is particularly important for young workers, given their greater need to qualify for suitable jobs in the formative years of their careers,” argued e61.
“Crucially, disadvantaged young workers tend to experience higher wage gains when switching jobs than those who are not disadvantaged.
“This may be because disadvantaged workers lack the networks to place them in well-suited, lucrative roles early on.”
The think tank attributes much of the drop in job turnover to a decline in the competitiveness and vitality of Australia’s businesses.
“Firm entry rates have fallen from 13% in the mid-2000s to 11% in the mid-2010s, while the employment share of young firms has fallen from 11% to 8% over the past decade.” same period, a pattern that is broadly based across industries,” the e61 report noted.
“These changes are significant given that young companies are often more innovative and can put pressure on established companies to improve.
“Young workers are particularly affected by the drop in company entry, as young companies have a higher concentration of young employees within their staff.”
This has resulted in young Australians bearing the brunt of a decline in the proportion of national income going to wages.
“The decline in the labor share of earnings over the past two decades is concentrated entirely among young workers,” the e61 report said.
Profit share growth debated
Business groups have questioned the existence of a general trend toward higher earnings growth than wages.
Analysis by AiGroup attributes nearly all of the decline in the labor share of national income over the past two decades to just two industries, mining and finance.
“For the remaining 82 percent of the economy there has been no fall in the labor share of income,” argued the group’s chief policy adviser, Peter Burn.
“The fall in the labor share of market sector income does not, therefore, support the proposition that firms in general have access to a larger share of industry income from which they can pay higher wages. high”.
Ai Group has published a separate paper to refute the ACTU’s argument that companies have captured most of the productivity gains made in Australia.
Burn said those claims are based on labor productivity and thus do not take into account the contribution of business investments in new machinery and technology that have generated much of the recent productivity growth and for which, he argued, companies deserve to enjoy the benefits.
“Despite its name, ‘labour productivity’ over the past two decades has been overwhelmingly driven by increased mining investment,” he said.
“It is therefore not surprising that wage growth and changes in labor productivity were out of whack in this period.
“By contrast, the multifactor productivity measure, which corrects for the increase in the amount of capital employed in production, results in a much more stringent and, in this case, much lower measure of productivity improvement.”
However, the e61 paper finds that it is not just in the mining industry where productivity gains appear to have accrued more to business profits than to workers’ wage packages.
“The estimated degree of pass-through from productivity to wages has decreased by nearly 25 percent over the last 15 years,” found e61.
“For example, a 1 percent increase in turnover per worker was associated with a 0.19 percent increase in average wages in the mid-2000s.
“But the degree of pass-through to wages fell to 0.14 per cent for 2020.
“The decline in pass-through has occurred across all industries, but is most striking in the lodging and food services industry, where the degree of pass-through fell from 0.31 percent to 0.20 percent.”
Which industries are experiencing the biggest wage increases?
Perhaps unsurprisingly, design and architecture, information and communication technology, and retail and services have seen the biggest salary increases announced over the past year.
They were the only three sectors where wage increases matched or bettered the 6.1 percent inflation rate.
Science and technology was the weakest sector, with only a 0.6% increase in pay for advertised jobs, while government, education and training, community services and legal posts saw smaller gains at 2%.
“There’s just a lot more inertia when it comes to wages and salaries in the public sector, and what I mean by that is the growth rate tends to differ less and move a little bit slower in both directions,” Cowgill said. .
“Partly reflecting the fact that wages and salaries are generally set by company agreements, which are only renegotiated every few years.”
Yet in all but the highest-paying sectors, wage growth is still below inflation, even for workers who switch employers to get a better pay rise.
The Seek figures also seem to indicate that the labor market may be peaking with the level of wage growth leveling off, albeit at just under 5 per cent a year.
“In the last few months, we’ve seen a kind of plateau in that monthly growth rate,” Cowgill observed.
“We’ve also seen that in our job posting numbers. Such small dips in June and July in job posting volumes, but broadly speaking they were stuck at a very high level.”