17 July 2019

Yesterday’s Australian gave the front page to a strange speech by a deputy secretary of Treasury [$], blaming low wage growth on “stubborn workers” who refuse to switch employers; the article doesn’t mention that the same deputy secretary has worked in Treasury for almost thirty years. Paul Karp offered this rejoinder: “The only reason changing employers works as a strategy to increase workers’ pay is because their current employers are paying them below market rates. … It is curious the Treasury didn’t study decreased union density or the record low days lost to industrial activity when it went looking for causes of wage stagnation. But what it did say is still revealing. Job switching works because every move realigns a worker’s current pay with their actual market value. Even those staying put benefit because the easier it is to make a move the more employers have to keep up with what others are paying. Unions should rise to the occasion to argue this paper tells us what we already know: employers will only pay more if forced to — and threatening a day off work will do just as well as threatening to leave for a competitor.”