Productivity can be key tool to boost wages in Australia

Instead of multi-employer bargaining, the Australian government has been urged to increase productivity to raise wages.
By: | September 27, 2022

This is according to Mark Wooden, a professorial fellow at the Melbourne Institute of Applied Economic and Social Research.

Professor Wooden’s calculations of average annual wages in OECD nations showed that real wages growth averaged just 0.7% in each year from 2011 to 2021 in countries where multi-employer bargaining was dominant.

In contrast, in countries where company-level bargaining dominated, his calculations revealed that average real wage growth was 1.1% a year. Eastern European countries where wage increases can come more easily through productivity growth were excluded. 

Employment minister Tony Burke has said multi-employer bargaining would be part of legislation to overhaul the industrial relations system this year. So far, the Council of Small Businesses Australia is the only industry group to express support, with others being more cautious.

Professor Wooden, also a member of the Fair Work Commission’s annual wage review expert panel but speaking only in his personal capacity, said Australia was not alone in experiencing low wage growth. 

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“There is no magic panacea to getting wage growth,” he said adding that a far better path for the Government would be to focus on productivity. 

“What we really want is for wages to follow productivity. Multi-employer bargaining by definition breaks it,” Professor Wooden said, reported The West Australian.