Rba Sates Wages Growth Remains Low, Employers Seek Alternatives Such As Perks Being Substituted For Pay Rises
February 14th, 2018
THE Reserve Bank of Australia has warned wages are unlikely to pick up for some time and when they do eventually rise the increase will be “gradual.”
The low wage growth situation has gotten so bad that the RBA says companies are now retaining staff by simply adjusting workplace conditions rather than paying them more money.
Better perks, improved working hours and signing bonuses are just some of the strategies the RBA says employers are using to avoid forking out extra cash to pay their employees.
Wage growth in Australia has been hovering near record lows for several years despite a strong labour market which created more than 400,000 jobs in 2017.
Despite these stellar numbers the unemployment rate actually increased in December to 5.5 per cent as more people began looking for work.
Yesterday RBA assistant governor Luci Ellis warned wages are unlikely to rise until the non-accelerating inflation rate of unemployment hits 5 per cent. But she warned the rate may need to drop further before companies feel comfortable offering pay rises to employees.
“We are mindful that, as we approach that figure, there’s a risk we find there is more room to come down before wage growth picks up in earnest,” she said in a speech.
“Our forecasts are for wage growth to pick up from here, but not immediately and then only gradually.”
Dr Ellis said the RBA was starting to see signs of the labour market in Australia tightening in business surveys, meaning suitable labour is becoming increasingly difficult to find.
“So far, though, the response to that difficulty has not been to pay people more to ensure they stay, or poach them from elsewhere,” Dr Ellis said. “Instead, we hear that firms are increasingly using other creative ways to attract and keep staff without paying across-the-board wage rises.
These include everything from hiring bonuses, to offering extra hours, to increasing perks and workplace conditions.”
Dr Ellis said firms are being forced to cut costs to remain competitive in the tough Australian market and that raising wages would be a fast way to blow out their budgets and lose their edge.
“We are seeing this particularly in new enterprise agreements, which lately have tended to involve smaller wage increases than the ones they replaced,” she said.
“If wage growth is to pick up, wage increases for other workers — including in future enterprise agreements or in other wage-setting streams — will need to pick up.”
But Dr Ellis said heightened competition in the retail market, which is one of Australia’s largest employers, will work against the much-needed lift in wages.
“Foreign retailers have entered the local market in recent years,” Dr Ellis said.
“This has also induced the existing players to reduce their costs to stay competitive.”