Why Your Next Pay Rise May Be Disappointing

Although successive governments continue to talk up their iconic credentials and how they have helped the economy, our salaries haven’t necessarily followed. A report by Indeed says the commodity price boom helped to push wages far higher than could be justified by worker productivity. While softer wage growth over the past five years has improved the Australian business sector’s competitiveness and improved the labour market, wages growth is slowing.

Indeed’s report looks at past economic downturns and booms, a reduction in unionisation has created a more flexible environment which, while saving many jobs and helping many companies stay afloat also resulted in softer wages growth. Their report says:

A more flexible labour market and reduced union power may be an impediment to higher wage growth in the future. As business conditions improve, there is evidence that wages have become less sensitive to labour market improvements.

The report found there has been moderate wage growth but that there have been peaks and troughs.

During the commodities boom, Indeed says wages growth wasn’t coupled growth productivity boosts. The same sort of thing happened about 20 years ago when IT workers with specific expertise saw their salaries climb during the Y2K boom and when GST was introduced. Those events created spikes in demand that were coupled with labour shortages rather than productivity.

When those events ended, the era of rapid wages growth ended.

Like to or not, unless you work in a flied where there is a labour shortage – for IT workers the infosec and AI/machine learning sectors are prime examples – you cannot expect your salary to shift by much more than CPI each year. And, for many industries even that may be optimistic.

Indeed says we went through a period when wages rose quickly but that the resources boom, a rise in our exchange rate and other factors resulted in a wages boom. But now that those conditions have softened, big pay rises aren’t going to come as easily.