Ultra low wage growth isn't accidental

18 Mar 2019

Ultra low wage growth isn’t accidental; it is the intended outcome of government policies. School of Economics Professor John Quiggin writes for The Conversation as part of a three-part series on wages, unemployment and underemployment

Australian currency The long debate over the causes of wage stagnation took an unexpected turn last week, when Finance Minister Matthias Cormann described (downward) flexibility in the rate of wage growth as “a deliberate design feature of our economic architecture”.

It was a position that was endorsed in a flurry of confusion 16 seconds after it had been rejected by Defence Industry Minister Linda Reynolds. Cormann had said policies aimed at pushing wages up could cause “massive spikes in unemployment”.

The ease with which Reynolds was trapped into at first rejecting and then accepting what her ministerial colleague had said flowed from the fact that Cormann had broken one of the standing conventions of politics in Australia, and for that matter, the English-speaking world.

For more than forty years, both the architecture of labour market regulation and the discretionary choices of governments have been designed with the precise objective of holding wages down.

These policies have been quite successful.

However, at least until recently, there has been bipartisan agreement on at least one aspect of them – that no one should mention their role in holding back wages.

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