Workers who stick with under-performing companies rather than chase more money in new jobs are contributing to stagnant wage growth, new research shows.
The coalition government argues increasing productivity will drive wage growth, which has lagged below targets and is contributing to poor inflation results.
But Labor argues the federal government has no plan to increase wages, and it's "a bit rich" to blame workers for sticking with what they know in uncertain job markets.
Treasury deputy secretary Meghan Quinn told an economic conference in Melbourne research from her department found a link between the job-switching rate and lower wage growth.
"More frequent job switching is associated with higher real wage growth, even for those that stay in their job," Ms Quinn said on Tuesday.
"This research suggests that a one percentage point decrease in the job switching rate, for any given demographic or cyclical conditions, is roughly associated with a half percentage point decline in average wage growth."
The research found part of the problem is the lack of new firms offering higher wages to attract talent, with the rate of entry for employing firms declining to 11 per cent, from 14 per cent in the early 2000s.
"As high-productivity firms absorbed relatively less labour, this is likely to have weighed on aggregate productivity and real wage growth as on average highly productive firms pay higher wages," Ms Quinn said.
Treasurer Josh Frydenberg told an Australian Chamber of Commerce and Industry event in Brisbane that wage growth was slower than the government would like.
"Along with almost every other developed country, we face particular challenges when it comes to boosting the pace of wages growth," he said in a speech.
"Lower inflation and inflation expectations, moderate productivity growth and ongoing spare capacity in the labour market despite strong jobs growth have all contributed.
"There are signs of improvement, but ultimately the best way to get higher wages growth is through a strong economy with rising productivity."
But Labor leader Anthony Albanese said wage stagnation was hurting the retail sector, potentially forcing job losses.
"The government has no policy at the moment to deal with wage stagnation, they have no policy to deal with productivity, they have no policy to deal with low consumer demand," he told reporters in Perth.
Australian Associated Press