Wages lag behind profits, managers' pay

December 1, 1999


Wages lag behind profits, managers' pay

By Jonathan Singer

Wages are still falling relative to executive pay and profits. Afraid of "some resentment in the community" at the seven-figure annual salaries for managing directors of many corporations, Prime Minister John Howard was moved to state several times in mid-November that corporate executives should exercise self-restraint in their remuneration.

Australian Bureau of Statistics figures for average weekly earnings (AWE) for ordinary time work of full-time adult employees for August show an increase of just over 2% from the same time last year, which is marginally above the inflation rate.

A survey by the company Mercer Cullen Egan Dell of payments to senior managers for the financial year 1998-99 (ending in June) showed these had increased by an average of 5.1% since the previous financial year, according to the November 20 Australian, after more than doubling the increases in average weekly earnings in the previous two years as well.

The average total earnings of all employees actually fell 0.9% between May and August. The increase in ordinary time earnings suggests this fall does not result from a reduction in wage rates, but from some combination of: less paid overtime, including through salary packaging of overtime; the growing proportion of workers employed part-time, and paid accordingly, even when many of them want more work or full-time employment; and, possibly, employment of greater numbers of workers on junior rates.

When AWE were rising by 4% annually, as they were a year ago, they could offset some of the downward pressure on total earnings; rising now at 2%, they cannot.

Rapidly rising company profits — 17.3% higher in the three months to September than for the same period a year ago — are based on the wage "restraint" of workers and are the source of company managers' pay increases. These, despite Howard's protestations about executives' pay, are supported by the government.

Since 1996, the Coalition government and employers have been relatively successfully, in an economic upswing, in preventing workers winning back what they lost in pay and conditions under the previous ALP government. Divide and rule tactics, spearheaded by the drive for enterprise bargaining and individual contracts, have been important in suppressing wage demands.

The submission by the Australian Chamber of Commerce and Industry to the Industrial Relations Commission on the ACTU's living wage claim — for a $24 per week increase in the minimum award wage rate of $385.40 — is a further example. It proposed that employers should be able to pay new employees as little as the minimum award wage, rather than the award that would normally apply, for three to six months, and that the minimum pay rate also become the basis for the "no disadvantage" test for individual Australian Workplace Agreements or enterprise agreements, which would continue indefinitely.

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