With each new round of wages data, the headlines tend to focus on how much or how little our hourly rates of pay have changed.
Okay, so it’s important. Wednesday’s figures from the Bureau of Statistics show wages rising 1.9 per cent, while consumer price inflation is running at 2.1 per cent.
But as millions of households already know, the rate of pay is only half the story. It’s the number of hours worked that is troubling roughly one million ’employed’ people who say they would like to work more.
This problem is glossed over to an extent because the ABS does not adjust its ‘hours worked’ figures each month for Australia’s rapidly growing population.
If it did, it would find what the chart below shows: the hours worked per resident have fallen 6 per cent since the financial crisis shook the nation at the end of 2008.
As a historical aside, the Rudd and Gillard government’s stimulus packages, bolstered by Chinese demand for our commodities, really did send Australia back to work from early 2009 to 2011.
They were extraordinary times, but short of a genuine infrastructure frenzy in the US and a related boost to commodities demand from China, nothing like that is about to lift hours-worked in the near future.
The drift to part-time
Both sides of the work equation are sagging – wage growth and hours worked. The new world of part-time work looks inescapable.
The chart below shows this clearly. Since the turn of the millennium, the number of hours worked by part-timers has increased, in population adjusted terms, by 40 per cent.
At the same time, the hours available in the form of full-time roles have fallen 7 per cent.
The question is, what can halt that process? There are essentially two answers.
One, often discussed on the right of politics, is a further reduction in real wages – the idea being that when labour is very cheap, a whole new category of jobs is created.
In the US, where the minimum wage is US$7.25, a generation of working poor can clean your pool or shine your shoes for just a few bucks. It’s a wages-down, hours-up approach – just work three jobs! – but not one most Australians would want to see here.
The second option is wages-steady, hours-up – and that’s about the best Australia can hope for in the medium term (the wages-up, hours-up of the mining boom is long gone).
Final demand in the economy is usually thought of as private or public sector, and right now low consumer confidence is holding back private demand.
The latest Westpac consumer sentiment index shows consumers worried about rising house prices, and in Westpac’s own words: “The ‘family finances over the next 12 months’ sub-index tumbled”.
Public sector demand, on the other hand, can be imposed by the government to kick-start the economy, much as the Rudd/Gillard stimulus measures did.
They can breath a bit of inflation into the economy by giving public servants higher pay-rises, but that comes at the price of higher taxes, higher debt, and annoyed voters.
That’s just what’s happening, actually. Wednesday’s data show public-sector wages growing at an annual rate of 2.4 per cent (just ahead of inflation) compared with 1.8 per cent in the private sector.
But the really big impact a government can have is to boost spending on things such as infrastructure, health and education.
Turnbull’s budget measures largely do that, which means taking on more national debt to finance the new jobs.
The hope is that the jobs created directly, and especially indirectly through businesses gearing up to fill government contracts, will shock the economy back to life.
Oh, and the new tax revenue generated should, in theory, be used to pay down government debt.
If managed well, it’s the right approach for this time, but a surprising one given the Coalition’s destructive ‘debt-and-deficit’ nonsense during the Abbott years.
Had a more measured approach to economic management been taken at the time of the ‘horror budget’ of 2014, wages and hour-worked might have held up.
We’ll never know, but it’s safe to say that the Turnbull government spending spree is overdue.