Finance Your Super Workers received no pay rise after the last superannuation guarantee hike was scrapped: ISA
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Workers received no pay rise after the last superannuation guarantee hike was scrapped: ISA

Super fund members should only access their savings as a last resort.
The 2014 super freeze left workers worse off, according to ISA. Photo: The New Daily
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Freezing the superannuation guarantee in 2014 failed to deliver higher wages for workers and could cost the average full-time worker $45,000 at retirement, according to new research.

Months after Prime Minister Scott Morrison said he would “carefully consider” whether to go ahead with the legislated plan to lift the SG, Industry Super Australia (ISA) has released analysis showing workers received no wage increase after the last hike was abandoned.

Then prime minister Tony Abbott scrapped the increase – which would have taken the SG to 10 per cent of wages on July 1, 2015 and 12 per cent of wages by 2019 – on the basis that it would put more “money in workers’ pockets”.

But ISA analysed 8370 enterprise bargaining agreements (EBAs) before and after the freeze and found “the promised wages boost never materialised and workers sacrificed their super for nothing in return”.

Source: Industry Super Australia

ISA chief executive Bernie Dean said the research showed freezing future increases would leave workers worse off.

“Working families have already taken the biggest hit in the fight against this virus, and they shouldn’t be asked to once again sacrifice their future,” he said in a statement.

“These small staged increases are affordable for employers and the key to giving people more choice about when they can stop work and control over their life in retirement.

The community won’t take kindly to a broken promise that will make millions more Australians dependent on the pension and hike taxes for those still working.”

ISA said scrapping the last planned hike could have cost the average full-time worker in their 30s $45,000 at retirement.

Its latest analysis shows that wages growth fell from 3.3 per cent a year to 3.27 per cent in EBAs struck after the hike was abandoned.

“This shows employers pocketed the lost super and workers’ total remuneration also went backwards,” ISA said.

“This paper confirms what Australians already knew, that most employers do not voluntarily return the loss of mandatory super payments as wages and the 2014 super freeze left workers worse off.”

Source: Industry Super Australia

Left-wing think tanks Per Capita and the McKell Institute have reached similar conclusions in the past.

Per Capita’s Emma Dawson and Shirley Jackson found in the five years since the government froze the super guarantee rate at 9.5 per cent of wages employees did not experience real increases in take-home pay.

And Kyle Taylor from the McKell Institute argued a rise in the superannuation guarantee could lead to higher consumer prices, but there was no evidence to show it would eat into wages.

“A worker on the cusp of retirement has already lost about $100,000 from previous super guarantee delays. Further pauses will compound the losses,” ISA said.

Economists at the Grattan Institute and Reserve Bank disagree, however. They believe future increases in the SG would be paid for by lower pay rises.

Grattan has even argued that people who have withdrawn $20,000 under the early super access scheme will still live comfortably in retirement if the SG stays at 9.5 per cent.

And RBA assistant governor Luci Ellis said in March that “historically about 80 per cent of the increase in the non-cash benefit tends to show up as somewhat slower wages growth than what you would have otherwise seen.

“It’s not a full trade-off, but it’s most of it.”

The superannuation guarantee is scheduled to rise to 10 per cent of wages on July 1, 2021 – before rising by 0.5 percentage points a year until 2025.

A table showing when the super guarantee will lift, and by how much.

The New Daily is owned by Industry Super Holdings