Inequality is a drag on our economy
International economic institutions and Australian experts say reducing inequality is essential to a stronger economy, yet Australian politics is hooked on the discredited philosophy of trickle-down economics.
“Low pay won’t fix itself.”
That was the message from 124 of Australia’s leading economic, legal and policy experts who have called for “proactive measures” to accelerate wage growth, raise minimum wages, strengthen collective bargaining, remove wage caps on public sector workers and improve Newstart.
In an open letter published in the Australian Financial Review, the experts say: “In our judgement, the deceleration of wage growth is due in significant part to the impact of deep structural and institutional change, and cannot be explained as a normal outcome of market forces.”
The signatories to the letter point out their views are shared by Australia’s economic guardians: “Policy statements from bodies such as the Reserve Bank of Australia, the Treasury and others also indicate the positive value of faster wage growth.
“We need to see a policy response from governments at all levels – and an acceptance that lifting wages can help the economy, not harm it,” said Professor Andrew Stewart from Adelaide Law School, one of the signatories.
The intervention by Australian experts advocating for improved wages is consistent with analyses by international economic organisations who have recognised how stagnant wages and growing inequality have become a brake on economic performance.
The International Monetary Fund (IMF), World Bank and the Organisation for Economic Co-operation and Development (OECD) have all produced hard evidence demonstrating that high inequality depresses economic growth.
“Reducing excessive inequality is not just morally and politically correct, but it is good economics,” IMF Managing Director Christine Lagarde has said.
And OECD Secretary-General Angel Gurria added: “Inequality can no longer be treated as an afterthought. We need to focus the debate on how the benefits of growth are distributed.”
Even some of the world’s most prominent and wealthiest business leaders concur.
“People are disconnected and not benefiting enough from economic growth. Inequality has grown. Wages are not rising enough. Business, government and community leaders have a responsibility to help those left behind,” wrote Jamie Dimon, CEO of JPMorgan Chase, in the Financial Times.
These contemporary economic analyses have failed to trickle down to the key economic players in the current Liberal–National Coalition government who remain wedded to an outdated neo-liberal model.
Mathias Cormann, the federal government’s finance minister, recently conceded that low wage growth was “a deliberate design feature of our economic architecture”.
Federal Treasurer Josh Frydenberg has argued we should ignore the issue of distribution of wealth and concentrate on “growing the economic pie”.
And Prime Minister Scott Morrison’s claim that “if you have a go, you’ll get a go” flies in the face of the growing body of evidence.
Union plan to reduce inequality and strengthen the economy
The ACTU’s Change the Rules campaign aims to:
- Ensure real wages rise through the introduction of a new Living Wage, tackling insecure work, restoring penalty rates for low paid workers, raising public sector wages and reforming the collective bargaining system
- Make sure everyone pays their fair share of tax, including corporations and the wealthy
- Lift the poorest Australians out of poverty through an increase in Newstart and the aged pension
- Increase expenditure on health and education
- Establish a comprehensive jobs plan to reduce underemployment and unemployment
- See measures introduced to tackle excessive corporate power.