Australia

Low wage growth is not just harming you, it’s threatening the economy

This week Reserve Bank governor Philip Lowe made it clear the central bank is worried about Australia's low wage growth.

Not only is it putting a brake on economic growth, but the governor said it is also threatening our "sense of shared prosperity".

It is an issue many families can relate to — a sense that you are working harder than ever but it is still not enough to meet the cost of living.

7.30 spent time with two families who spoke about the difficulties of raising a family while feeling that financially they are going backwards.

'You wonder where you're going wrong'

Phil and Amity Giles and their children

The Giles family live in Sydney's northwest. Phil is a wholesale butcher and is at work by 3am on weekdays. His wife Amity works four days a week as a teachers' assistant at a local high school.

Mr Giles has recently negotiated his first decent pay rise in years, after realising his wage had stagnated to the point where it was difficult to cover bills, groceries and the mortgage.

On paper the family of six are comfortably middle class, with a combined income close to $150,000, but the reality is different.

"I don't think that anyone feels like their wage is keeping up with the cost of living," Mr Giles said.

"The electricity bills, phone bills, gas bills, water bills, our rates, water, everything is going up. And not just going up a little, it's going up by a large percentage."

In order to cut their expenditure, the two school-aged kids have reduced their extra-curricular activities. They also decided to turn down a ballet scholarship offered to eldest daughter Zara, because it was cheaper to keep all the kids in the same Catholic school.

Mrs Giles finds it frustrating that even on full-time wages there is no room for luxuries.

"You work hard, you're honest, you do everything they say, keep everything simple. And you just wonder where you're going wrong sometimes."

'Everything is increasing around me'

Ellie Knock stands on a beach

Ellie Knock works as an early childhood educator in Newcastle. She moved there from Sydney when rent became unaffordable.

Despite 10 years in the sector she only earns $21 an hour, which is just slightly more than the minimum wage.

Ellie and Leo Knock on a beach

Under the award she gets yearly pay rises, but they are not enough to cover rising living costs. Last year she earned an extra $0.68 an hour, but even gaining more qualifications will barely make a difference.

"If I was to get a diploma I think it's 50 cents or $1 more an hour," she said.

"So studying for two more years extra, that would give me 50 cents more in wages.

"I feel like everything is increasing around me and that my wages, they're not stagnant, but they're not growing at the same rate."

Economic growth under threat

According to Professor John Buchanan from the University of Sydney's Business School, the gap between wages and the cost of living is growing in many developed countries, despite rising productivity.

"Australian workers are more productive now than they've ever been, but they have not shared in the gains in the way that they used to," he said.

John Buchanan

Professor Buchanan says it is rare that workers can demand higher wages from their bosses to meet their rising costs.

"I'm a labour market economist and the labour market doesn't offer that many opportunities," he said.

He argues it is not just a problem affecting households, but also one that is threatening economic growth.

"If the population doesn't consume, that retards the demand for goods and services. So this is why the World Bank and the International Monetary Fund are concerned," he told 7.30.

"These international agencies say if you have more inclusive growth, it's not just good for the families that get more income, it's actually good for the economy because it creates more demand for these services, which then in turn creates more jobs."

Original Article

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