A shrinking slice of pie: new research shows wages share of national income falling behind profits

A shrinking slice of pie: new research shows wages share of national income falling behind profits

Artwork by Peter Lake.
New research by the ACTU reveals that wages have failed to keep up with productivity growth over the past decade, busting the myth of a wages breakout and confirming that profits are increasing at the expense of workers’ incomes.

The research, by the ACTU’s Economic Policy Unit, to be presented to the ACTU Executive today, finds that workers’ share of national income has been falling since 2000. This puts upward pressure on inequality, with national income being held in fewer and fewer hands.

ACTU Secretary Dave Oliver said the shrinking share of national income going to workers should be a wake up call for public policymakers.

“Claims by the business lobby about a wages breakout have been repeated so often, they have become the accepted wisdom in politics and the media,” Mr Oliver said.

“But the truth is very different. The reality is that productivity is rising faster than wages, which means that business is capturing a larger and larger share of productivity gains. Just as in the 1970s it was a problem when wages grew faster than productivity for an extended period it’s a problem now when wages are falling behind.

“But this is never enough for the business lobby, who want to reduce workplace rights even further to allow them to grab an even larger slice of the pie. Rather than share the benefits of higher productivity equally, business are taking an ever higher share for themselves as profits. This is leading to a more unequal economy and society.

“Productivity and real wages grew fastest in the 1990s when Labor introduced enterprise bargaining. This isn’t a coincidence as there is a strong connection between giving workers fair rights at work and good outcomes on productivity and real wages.”

The paper -  titled A Shrinking Slice of the Pie, which is part of research being conducted by the ACTU in preparation for this year’s minimum wages case - finds that the “decoupling” of productivity and wages since 2000 is the exact opposite of the supposed “wages overhang” of the 1970s. This time, workers have been increasing productivity but have not been rewarded for it by an equal increase in wages.

Wages’ share of national income is now the lowest it has been for more than half a century. Since 2000, productivity has risen by an average of 1.3% a year, but real hourly incomes have risen by only 0.6%. This wages underhang is one of the most pronounced in the OECD, and has taken place across all industry sectors.

“Unions make no apologies that whenever they bargain on behalf of workers, they will seek to ensure that workers are fairly rewarded for the contribution they make,” said Mr Oliver. “This is especially so when it comes the national minimum wages case that begins later this month. We are concerned at the emergence of a working poor in Australia and through the minimum wages case will be seeking to make sure that the gap between low-paid workers and the rest of the workforce does not widen.”