Retirement
What cost does wage-suppression really have on super?
Record-slow wage growth in Australia is threatening “severe long-run damage” to the superannuation retirement system and “aggressive” wage-suppression measures implemented by employers aren’t helping.
What cost does wage-suppression really have on super?
Record-slow wage growth in Australia is threatening “severe long-run damage” to the superannuation retirement system and “aggressive” wage-suppression measures implemented by employers aren’t helping.
That’s the view put forward by research institute, the Centre for Future Work, in a September report. The director at the research group, Dr Jim Stanford said wage-suppression strategies like temporary wage freezes, wage caps, reduced penalty rates and wage theft “directly undermine superannuation savings, and hence the future retirement incomes of affected workers”.
Mr Stanford said: “Workers’ superannuation payments are negatively affected by the suppression in wages below normal trajectories. The damage is then compounded over many years by the subsequent loss of investment income on foregone superannuation contributions.
Further, wage-suppression will have flow-on effects in retirement as both workers’ wages and employers’ contributions to super are constrained. “Government will share a significant portion of the resulting damage,” he said. “They will collect less in taxes on superannuation contributions and investment income, and will pay out more in means-tested Age Pension benefits (since workers’ superannuation incomes will be smaller).”
“All Australians will pay a significant price if wage growth is not restored, so that labour incomes begin once again to rise at least in tandem with productivity.
“Workers, unions, governments, and superannuation trustees and administrators should all be cognisant of the damage to superannuation accumulation… arising from wage-suppressing actions by employers.”
The report argued that the real cost of wage-suppression to aggregate superannuation balances upon retirement could exceed $100 billion (in 2017 dollars). Large corporations such as Aerocare, Qantas, Griffin Coal and Streets Ice Cream were singled out with the report arguing that “in excess of three million workers” have experienced wage theft.
“Millions of Australians have been confronted with one or more of these forms of wage suppression from their employers, so the aggregate impacts across the economy are enormous,” Mr Stanford explained.
The baseline superannuation accumulation simulation given in the report saw an “average” 40-year-old male with a starting salary of $84,859 run out of super at 90 after accumulating a nominal super balance of $886,704 upon retirement. The base case for the average 40-year-old woman with a starting salary of $30,000 saw her run out of super at 93 after accumulating a nominal super balance of $696,597 upon retirement.
However, Mr Stanford gave several examples of how wage suppression could impact the average worker. For example, the imposition of a two-year temporary nominal wage freeze (which the report argued equates to a 2.5 per cent real wage loss for each year of a zero per cent nominal wage change) would see a nominal loss in superannuation upon retirement of $37,458 dollars for men and $31,415 for women.
An indefinite freeze could cost men up to $41,977 (nominal) upon retirement additionally. The report noted that the figures assume that the loss in income resulting from wage suppression has been sustained and not recovered.
A reduction in Sunday penalty rates could cost both men and women $33,941 in nominal terms, underpayment could cost $59,878.
The removal of enterprise agreements could leave individual male retirees a staggering $268,543 poorer in nominal terms.
Mr Stanford concluded: “If the goal of the [superannuation] system… is indeed to maximise the retirement benefits of superannuation fund members, then the growing use of wage suppression strategies by employers is a relevant and concerning development – one that would seem to justify a response from the superannuation system.”
Superannuation
Should the government add $5k to low-income super balances?
Superannuation funds are proposing that the Morrison government should add $5,000 to low-income earners’ retirement funds, after 1 million young workers have emptied their super during the COVID-1...Read more
Superannuation
2020’s top-performing super funds revealed
Australia’s top 10 performing growth superannuation funds for the 2020 calendar year have been revealed. ...Read more
Superannuation
SA’s $2bn superannuation drain puts 34k residence in zero territory
More than 34,000 South Australian residences have almost emptied their superannuation coffers, as members take advantage of the government’s early access to superannuation scheme, new research has s...Read more
Superannuation
How did your super fund perform in 2020?
Despite the COVID-19 pandemic, superannuation funds have delivered a positive return for members over the 2020 calendar year, new research has revealed. ...Read more
Superannuation
Senator slams super funds: ‘People are smarter than super funds think’
Senator Andrew Bragg has hit out at superannuation funds after they stood up in opposition to the government’s alleged plan to ask workers to choose between putting money in their super or having m...Read more
Superannuation
Why opt-in super proposal is a ‘secret tax’ on Aussie workers
A proposal to give workers the option to pick between a wage rise or a super contribution increase has been slammed by industry funds, branding it as “a secret tax” on workers. ...Read more
Superannuation
Early super access could be less than expected
Money accessed through the early release of super scheme looked to be coming in under the government’s revised expectations as the scheme drew to a close at the end of 2020. ...Read more
Superannuation
Proposed super reforms to rob millions of Australians
Australia’s largest union has rejected the government’s new super reforms on the basis it will leave members worse off long-term due to being “stapled” to a high-fee fund. ...Read more
Superannuation
Should the government add $5k to low-income super balances?
Superannuation funds are proposing that the Morrison government should add $5,000 to low-income earners’ retirement funds, after 1 million young workers have emptied their super during the COVID-1...Read more
Superannuation
2020’s top-performing super funds revealed
Australia’s top 10 performing growth superannuation funds for the 2020 calendar year have been revealed. ...Read more
Superannuation
SA’s $2bn superannuation drain puts 34k residence in zero territory
More than 34,000 South Australian residences have almost emptied their superannuation coffers, as members take advantage of the government’s early access to superannuation scheme, new research has s...Read more
Superannuation
How did your super fund perform in 2020?
Despite the COVID-19 pandemic, superannuation funds have delivered a positive return for members over the 2020 calendar year, new research has revealed. ...Read more
Superannuation
Senator slams super funds: ‘People are smarter than super funds think’
Senator Andrew Bragg has hit out at superannuation funds after they stood up in opposition to the government’s alleged plan to ask workers to choose between putting money in their super or having m...Read more
Superannuation
Why opt-in super proposal is a ‘secret tax’ on Aussie workers
A proposal to give workers the option to pick between a wage rise or a super contribution increase has been slammed by industry funds, branding it as “a secret tax” on workers. ...Read more
Superannuation
Early super access could be less than expected
Money accessed through the early release of super scheme looked to be coming in under the government’s revised expectations as the scheme drew to a close at the end of 2020. ...Read more
Superannuation
Proposed super reforms to rob millions of Australians
Australia’s largest union has rejected the government’s new super reforms on the basis it will leave members worse off long-term due to being “stapled” to a high-fee fund. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
