Wages start to accelerate upwards as job market heats up

Wages are on the up, after decades of stagnation. The national Advertised Salary Index (ASI) produced by SEEK show that in the year to July 2022, advertised salaries rose by 4.1%.

Salaries for roles in Design & Architecture (7.3%) and Information & Communication Technology (6.2%) grew the fastest. A range of industries with heavy government involvement, such as Government, Education & Training, Healthcare & Medical and Community Service & Development, experienced slower growth in advertised salaries.

Advertised salaries are growing much more rapidly than before the pandemic, at nearly double the pace seen in 2019. However, advertised salaries are still being outpaced by consumer prices, with the Consumer Price Index (CPI) up 6.1% in the year to the June quarter.

“Competition for talent is fierce, with the unemployment rate at a near 50-year low…. employers are responding to the tight labour market by increasing advertised salaries,” said SEEK Senior Economist, Matt Cowgill.

“Unlike previous labour market booms, such as the mining boom, this is not a situation in which some parts of the country pull ahead much more rapidly than the rest. The labour market has been almost uniformly strong,” says Cowgill.

Existing wage reform

In general, employers are more willing and able to adjust the salaries advertised for vacant roles than the salaries paid to existing staff. For decades, negotiating for a pay rise has been something that has rested on individuals and individual workplaces. But the shift to renewed and reformed industry-wide bargaining may be on the cards.

A new thinking around pay and conditions shows something unusual is happening in Australian politics. A consensus is forming between business and the unions; there is general agreement that wages must rise and there is a willingness to collaborate to improve enterprise bargaining. After almost a decade of Coalition governments, the change from toxic to teamwork is startling.

The timing of this new mood of togetherness is important as it comes on the eve of the Federal government’s job summit, due to kick off on Thursday in Canberra.

How to boost wages and ‘mend’ enterprise bargaining are likely to be a big focus at the Jobs summit. The Australian Council of Trade Unions chief executive, Sally McManus, said last week that industry-wide bargaining needed to be restored to allow agreements to cover multiple workplaces. The bargaining power of half the workforce had been “smashed” over the past three decades, she said, leading to stagnant wage growth.

Not all business leaders share her views, of course. However Business Council of Australia chief executive Jennifer Westacott is keen to see industry and unions agree on changes to enterprise bargaining, including the better-off-overall test. Westacott believes it will simplify the system for employers and ensure workers are paid more and contributing to the economy.

Westacott said she and McManus “were on a unity ticket” seeking to revive key principles of an abandoned recent agreement between the two organisations on industrial relations reform.

“The system was never designed for people in small workplaces … and it just needs to be upgraded to suit the economy of today, not the economy of 30 years ago,” McManus said.

United we stand

In a rare show of unity, the ACTU, Business Council of Australia, Australian Chamber of Commerce and Industry, and Australian Industry Group released a joint paper of “common interests”.

Their five agreed areas for reform are the establishment of Jobs and Skills Australia to provide advice to government; more investment in vocational education and training; more funding for apprenticeships; an update to the national skills strategy to focus on digital literacy; and a pledge to support lifelong learning.

ACCI chief executive Andrew McKellar said the joint list of proposals was a “powerful demonstration by peak business and union organisations that there is a genuine willingness to work together where we share common ground”.

“The best way to grow our workforce and future-proof against recurring shortages is by training Australians. Skills reform is needed to provide consistent funding increases to vocational education and training, and grow apprenticeship numbers, ensuring the system is in lockstep with industry needs,” he said.

The treasurer, Jim Chalmers, told Sky News that he welcomed the proposals, but had “realistic” expectations about the consensus that would be reached.

“We’re realistic about what it might agree on, but we are confident that by tapping this spirit that exists in the community that can move forward together,” said Chalmers.