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Thereís an obvious reason wages arenít growing, but you wonít hear it from Treasury or the Reserve Bank

TJ Ryan Foundation Research Associate, David Peetz, writes in The Conversation (9.9.19) that, after decades of research showing the link between union power and wages growth, government economists don't want to talk about it.

'Wages growth for Australian workers is among the worst in the industrialised world. For more than a third of workers on individual contracts, wages aren’t growing at all.

'This is odd, given Australia is in a “record” 28th year of economic growth with apparently low unemployment and a supposedly strong economy.

'Government economists have floated a range of reasons, from blaming workers not changing jobs enough to caps on public-service salaries. But the most obvious factor is the loss of worker power due to the decline in unionisation over the past three decades.

'… As the late Princeton University economist Alan Krueger pointed out last year, monopsony power – the power of buyers (employers) when there are only a few – has probably always existed in labour markets “but the forces that traditionally counterbalanced monopsony power and boosted worker bargaining power have eroded in recent decades”.

'So yes, there are a number of reasons why workers have less power, and why wages growth is weaker, than in the past. Among them, though, we cannot ignore the critical fall in union bargaining power.'

 

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