Invest
No trade-off needed between superannuation and wage growth
The very real issue of record-low wage growth would not be fixed by canning planned increases to compulsory superannuation contributions by employers, a new study has indicated.
No trade-off needed between superannuation and wage growth
The very real issue of record-low wage growth would not be fixed by canning planned increases to compulsory superannuation contributions by employers, a new study has indicated.
In a new research paper from the director at the Australia Institute’s Centre for Future Work, Dr Jim Stanford outlined that “the assumption of a one-to-one trade-off between superannuation contributions and wage growth is not credible”.
Dr Stanford, who is also an economist, began by critiquing arguments against the scheduled superannuation guarantee increases, which are expected to gradually move towards 12 per cent in five annual stages beginning 1 July 2021.
Former prime minister Paul Keating, the man behind the advent of Australia’s compulsory superannuation scheme, has previously publicly slammed a number of politicians who voiced opposition to such increases.
Dr Stanford argued that “proponents of this view are exploiting widespread concern over the current historically low pace of wage growth, to argue that workers should forgo promised improvements in superannuation to supplement their (disappointing) current incomes”.
Cancelling planned increases to the superannuation guarantee would not shift income from employers to workers, he indicated.
Instead, it would almost certainly lead to “even further reduction in overall labour compensation relative to GDP”.
The paper drew its conclusions from economic statistics, and found that on average, wages are more likely to accelerate and grow at a faster rate when the superannuation guarantee rate was increased.
“More realistically, when wages are understood as the outcome of normal and ongoing regulatory, institutional and bargaining processes (rather than determined by competitive market clearing), there is no reason to expect any automatic trade-off between wages and superannuation contributions,” the report said.
This is when Dr Stanford made the statement that “record-low wage growth will not be ‘fixed’ by giving up planned increases in compulsory superannuation”.
Instead, he pointed out that Australians who are concerned by the real issue of weak wage growth should support measures that would directly tackle that problem.
On this issue, the economist called for a higher minimum wage, an expanded mandate for Modern Awards, the revitalisation of collective bargaining, and the alignment of fiscal policy with the goal of stronger wages.
About the author
About the author
Economy
Frydenberg flags tax and JobKeeper reform
Treasurer Josh Frydenberg has opened the door to forwarding $20 billion in tax cuts, while announcing income support will remain to avoid the September cliff. ...Read more
Economy
What’s wrong with GST?
Australia’s tax system was ill-equipped to support a growing economy even before the COVID-19 crisis hit, which is why Australia’s GST system is in need of a complete overhaul, a consultancy firm ...Read more
Economy
Recession tops the list as biggest financial worry
A local or global recession is the greatest financial concern for Australians at the moment, followed closely by paying bills and managing debts, according to a recent survey. ...Read more
Economy
Rates unchanged but uncertain economic recovery remains
The RBA has held the official cash rate at 0.25 per cent but warns of an uncertain future, with unemployment and consumer spending remaining a major stumbling block for Australia’s economic recovery...Read more
Economy
Should government policy target youth unemployment?
Younger Australians have been disproportionately impacted by COVID-19, which leads to poorer financial and social outcomes, according to a financial specialist. ...Read more
Economy
Will markets continue to rally in 2020?
Markets are widely tipped to continue to be volatile in the second half of the calendar year, following a sell-off in March and a recovery in the second quarter, according to three experts. ...Read more
Economy
How much will the COVID-19 recovery cost the national government?
The Australian government needs to spend up to $90 billion to get over half a million Australians back into work post-COVID-19, new research has found. ...Read more
Economy
8 factors set to impact the economy into 2021
There are a number of major factors that investors should be wary of as the economy and sharemarkets begin their recovery from the COVID-19-driven downturn. ...Read more
Economy
Frydenberg flags tax and JobKeeper reform
Treasurer Josh Frydenberg has opened the door to forwarding $20 billion in tax cuts, while announcing income support will remain to avoid the September cliff. ...Read more
Economy
What’s wrong with GST?
Australia’s tax system was ill-equipped to support a growing economy even before the COVID-19 crisis hit, which is why Australia’s GST system is in need of a complete overhaul, a consultancy firm ...Read more
Economy
Recession tops the list as biggest financial worry
A local or global recession is the greatest financial concern for Australians at the moment, followed closely by paying bills and managing debts, according to a recent survey. ...Read more
Economy
Rates unchanged but uncertain economic recovery remains
The RBA has held the official cash rate at 0.25 per cent but warns of an uncertain future, with unemployment and consumer spending remaining a major stumbling block for Australia’s economic recovery...Read more
Economy
Should government policy target youth unemployment?
Younger Australians have been disproportionately impacted by COVID-19, which leads to poorer financial and social outcomes, according to a financial specialist. ...Read more
Economy
Will markets continue to rally in 2020?
Markets are widely tipped to continue to be volatile in the second half of the calendar year, following a sell-off in March and a recovery in the second quarter, according to three experts. ...Read more
Economy
How much will the COVID-19 recovery cost the national government?
The Australian government needs to spend up to $90 billion to get over half a million Australians back into work post-COVID-19, new research has found. ...Read more
Economy
8 factors set to impact the economy into 2021
There are a number of major factors that investors should be wary of as the economy and sharemarkets begin their recovery from the COVID-19-driven downturn. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.