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Overworked And Underpaid: Why We Need To Tackle Pay Inequity For The Benefit Of All

We all lose out when we forget the "fair" part of "Advance Australia Fair".

30/05/2017 7:12 AM AEST | Updated 30/05/2017 7:12 AM AEST

Australia is in a vicious circle as the latest figures on wage growth, underemployment and inequality show. But the current Budget fails to address underlying causes of falling real wages, rising underemployment and widening inequalities.

According to the latest ABS figures, wage growth has been slowing since the GFC, and fell behind inflation during the first quarter of this year. Wages grew by 0.5 percent during the March quarter, translating into an all-time low year-on-year increase of only 1.9 percent. With inflation currently running at 2.1 percent, it means that real wage growth went backwards; that is, real wages actually fell.

Even though the headline unemployment rate slipped to 5.7 percent in April, all of the increase in job numbers came from part-time employment, while full-time employment fell by 11,600. OECD data suggests that the part-time employment share in Australia is the third-highest among the 34 OECD member countries.

Rising inequalities divide the society and fracture social cohesion.

More disturbingly, the hours of paid work are falling. The latest ABS data show that hours worked per month slipped by 3 million over the past 6 months. If one looks at the smoothed "trend" measure of employment and hours worked, the divergence becomes much starker.

While 120,000 more Australians have found jobs during the last six months, the number of hours worked per month has fallen by 5.2 million.

This means the incidence of involuntary underemployment is on the rise. The most recent estimate, for February, shows 1.134 million Australians working fewer hours than they would like. This translates into an underemployment rate of 8.7 percent.

When added to the current headline unemployment rate, we have a whopping "underutilisation" rate of around 14.6 percent!

These are obviously not signs of a robust economy.

Thus, one should not be surprised that household debts in Australia have risen to a record high of 189 percent of disposable income. With household debts of more than 125 percent of GDP, Australia now has the world's most indebted household sector relative to GDP.

The debt/GDP ratio rises when private debt grows faster than GDP. As more and more income goes in servicing debt, less are available for spending on goods and services. This stifles the economy, and hence employment. Wages fall as a share of GDP.

While the majority of the Australians are struggling with low and falling wages, rising underemployment and mounting household debts, the top 20 percent of households earn 12 times more than the $22,000 earned by the bottom 20 percent of households.

According to Oxfam Australia's latest report, based on data from Credit Suisse, wealth in Australia is concentrated in the hands of a few: the top one percent have more than 22 percent of total Australian wealth -- more wealth than the bottom 70 percent of Australians combined.

The two richest billionaires in Australia, who are part of the top one percent, own more than US$16 billion between them -- more than the combined wealth of the poorest 20 percent of the Australian population.

Ballooning executive pay is one of the main drivers of rising income inequality. While number of paid work hours is falling, labour exploitation is on the rise as the unpaid overtime work gets longer.

The Australia Institute's 2016 survey found that full-time workers were on average performing more than five hours a week in unpaid overtime. Australians are putting in some of the longest hours (more than 50 hours) in the developed world, coming in ninth in a survey of OECD countries. Full-time employees are on average putting in extra 4.28 hours and part-time staff are working an hour over their contracted hours every week.

ABS data show that around 30 percent of employed men and 11 percent of employed women report usual working hours of 45 or more each week.

Rising inequalities divide the society and fracture social cohesion. Rising inequalities also bite the economy as the middle class shrinks. The economy spins in falling wages, rising household debts, falling demand and declining jobs-work hours when inequalities rise.

Increased job insecurity due to disappearing full-time jobs and rising casualisation, and declining aggregate demand owing to rising inequality and household debts are major factors in slower wage growth, which weighs on the economy.

Cutting corporate tax rates, reducing penalty rates, slashing social services and "termiting" welfare programs -- the mainstay of the current budget -- are not the way to propel the economy on a robust and prosperous path.

Nor can they enhance fairness and social cohesion. Instead, they feed into the vicious circle of low growth and rising inter-generational inequalities.

Obsession with public debt while ignoring rising private debt, simply compounds the vicious circle.

Thus, the current Budget cannot "Advance Australia Fair".


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