Employers can afford to boost the superannuation guarantee to 12 per cent as planned by 2025 as well as boosting wage rises from current rock-bottom levels, according to new research.
Since 2013, when the economy was recovering from the global financial crisis, wages growth halved from an average of 4 per cent to 2 per cent.
At the same time the super guarantee (SG) climbed from 9 per cent to 9.5 per cent, where it plateaued from 2015.
A number of commentators, including the Grattan Institute and Liberal Senator Andrew Bragg, have claimed increases in the SG will hold down wages.
Senator Bragg called for making super optional for low-income workers and Grattan called for an end in SG rises, saying workers have enough.
But research by Dr Jim Stanford, director of the Centre for Future Work, has found there is no connection between super increases and the level of wage increases.
In fact, slowing wages growth has given bosses a pile of money, which they are sitting on for their own use.
“Australian workers are more productive then they’ve ever been and they’re getting more productive every year,” Dr Stanford told The New Daily.
“In theory productivity is supposed to translate into higher real wages – the link has been imperfect for a long time – workers haven’t been getting their full share. Now the link is broken completely and workers are getting nothing in the form of higher real wages,” Dr Stanford said.
“That means there’s an enormous wedge of surplus profits that is sitting there that employers are absolutely capable of using to both increase wages and invest more in the retirement security of their workers.”
Critics of a boost to the SG have said it will hold down wages as employers find ways to fund their increased super bills.
“However, concrete empirical evidence to support this contention has not been provided by the leading proponents of this argument,” Dr Stanford’s research said.
“The notion that historically weak wage growth should be ‘solved’ by raiding workers’ retirement incomes in order to supplement inadequate current incomes, is both economically perverse and socially punitive.
“It effectively means workers would be giving themselves a pay rise with their own money,” he said.
Despite claims to the contrary, employers were not in a position to hold down wage growth even further, or cut wages as the SG rises.
“What stops them from driving wages even lower are minimum wage laws, our award system, what’s left of enterprise bargaining and the expectations of Australian workers,” Dr Stanford said.
No proof of the concept
Dr Stanford’s research found that there was no correlation between increases in the SG and lower pay rises.
His research refers to a 2013 Fair Work Commission decision to increase the minimum wage by 2.6 per cent in a year when the SG had risen 0.25 per cent.
A year later in 2014 the SG rose again by 0.25 per cent while the minimum wage rose 3.1 per cent.
“The minimum wage increases in those years were not unusually low, compared to adjacent periods (when the SG rate was unchanged),” the research found.
Since 2015, wages and salaries as a percentage of GDP have fallen dramatically despite the fact that there has been no increase in the SG.
Indeed the wages share of the economy is back to levels not experienced since 1960, before a long inflationary upswing that was eventually tempered by the Hawke government’s Prices and Incomes Accord from 1983.
Dr Stanford also found that over a period back to 1997 there were more likely to be higher increases in wages in periods when there were more increases in the SG and lower increases in periods where there were less SG increases.
“In years when the SG rate was increased, it was twice as likely that wage growth would be above average, as below it,” Dr Stanford found.
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