Around Australia, university unions are beginning a new round of enterprise bargaining, attempting to negotiate improvements in conditions and pay for all the staff who work in the university sector.
In every case, there is a need to balance the hopes and experiences of workers with the financial reality of the employing university in a context of ever-reduced government funding.
Now, I am most definitely not an economist – one unit at first year level was enough for me! However, my simple understanding is that we need to ensure that Australian workers have sufficient income to spend because this creates demand that leads to more jobs and higher employment rates. A recent report indicates that these conditions lead to more equality.
Unfortunately this does not seem to be what is happening in many countries around the world at present. Inequality has risen across most of the OECD countries over the past 40 years and this has been produced by a decline in middle-income jobs leading to a widening pay gap between low and high income jobs. ABS figures show that since 1975, wages in Australia have increased by 72 per cent for the 10 per cent highest income earners, but only 23 per cent for the lowest 10 per cent. That means in 1975, the income of the highest earners was double that of the lowest, but by 2014 it was three times as much. If the income of the lowest paid had increased by the same amount, each would be earning an additional $16,000 a year today.
Generally, what happens when wage growth is slow is that people start reducing their spending...
We can’t consider wage growth without also considering levels of productivity (any round of enterprise bargaining is based on employer assumptions that it is possible to get workers to work harder – or if we want to use the ubiquitous phrase that has been used so often I now feel sick when I hear it – work smarter).
Generally, what happens when wage growth is slow is that people start reducing their spending; this creates a fall in demand and ultimately leads to higher unemployment. Before the GFC in countries such as the US, Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Switzerland, productivity increased over 100 per cent more than did wages.
Even today, productivity is increasing at a much greater rate than wages. Workers are working harder for less financial reward and have been increasingly doing so for over 50 years (is there a point when it is impossible to increase productivity?). One study showed that in 2015, the average American man had lower wages than his counterpart 45 years ago when adjustments were made for inflation.
What has this got to do with education? As I understand the economic argument put forward in a recent book by Michael Keating, if we increase wages, demand and spending increase. If we accompany this with better access to, and participation in, higher education, then more people will get better jobs which leads to increased tax revenue, improved productivity and innovation.
At present, Keating argues that productivity has continued to increase in Australia but there has been little wage growth. If this continues, he argues, Australia will enter a period of economic stagnation where productivity will slow in a manner similar to that being currently experienced in the US. Slow or stagnant productivity then results in increased levels of inequality.
Andrew Leigh argues that we do not have to accept increasing levels of inequality in our society, that “inequality is not the price of progress”. However, in order to address growing inequality, we need to have a government committed to measures that tackle inequality.
Currently this is not what we have; rather we have a range of policies that will serve to increase inequality including increasing student contribution to their higher education costs, lowering the repayment threshold, and outside of higher education, among many others, reducing penalty rates and slowing the rate of pension increases.
So as the higher education sector moves into enterprise bargaining, it is important to remember that arguing for increased wages is not a selfish demand, but rather an important economic strategy that can lead to further productivity improvements, but more importantly, to reduced societal inequality, one of the key aims of higher education.