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Despite record job vacancies, Australians shouldn't expect big pay rises anytime soon - and here's why

TJ Ryan Foundation Research Associate, David Peetz, writes in The Conversation (4.4.22) about recent positive national unemployment and job vacancy figures. The author points out that, despite there being almost one job vacancy for every unemployed Australian, this isn’t translating to better wages.

'Something extraordinary has been happening for Australians seeking jobs in the past few months. The number of vacant jobs on offer has soared to a new all-time high.

'Figures released in budget week show there were almost twice as many jobs available in February this year - 423,500 - as in February 2020, before COVID arrived on our shores. And the number of Australians satisfying the ABS that they were “unemployed” was just 563,300, the lowest in 13 years.

'What this means is that in February 2022 there were only 1.3 unemployed people chasing each vacant job, the smallest ratio on record - down from three unemployed people for each vacancy in 2020, five for each vacancy in 2000, and seven in 1990.

'The unemployment rate is now just 4%, and is budgeted to fall to 3.75% within months, taking it to a five-decade low. Yet wages growth in Australia remains astoundingly low. Now 2.3%, it has been below 2.5% for seven years.

'The Reserve Bank says it is targeting wages growth of “three point something”. It has failed to achieve it for the best part of a decade.'

Australia must avoid entrenching a US-style 'working poor'

Warren Hogan comments in the Sydney Morning Herald (12.5.22) on the effects of wage stagnation and persistent levels of economic inequality in Australia despite increased job availability figures.

'Australia deregulated and opened its economy at the end of the 20th century, but unlike the United States, we have avoided the formation of an underclass of working poor. People who work but struggle to pay the rent and feed their families. But Australia is now heading in that direction with big cuts to the living standards of low-income earners driven by surging costs of living.

'A central tenet of the modern Australian economy is that those on low incomes have participated in the rising prosperity that economic reforms have delivered. This is consistent with that very Australian sense of egalitarianism, but more importantly, it is a foundation stone of a strong and stable domestic economy.

'... Supporting household incomes through a period of rising interest rates is our best chance of keeping the economy on an even keel. Raising the minimum wage may seem counter-intuitive if inflation control is the ultimate objective. But supporting household incomes while raising interest rates gives us our best chance of getting monetary policy settings right for the long-term.'

 

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