Wage growth jumps for new hires, Seek advertised salary figures show

New data confirms an old adage: the best way to get a big pay raise is probably to get a new job.

Figures from Australia’s biggest job market, Seek, which currently hosts more than 200,000 job vacancies a month, show advertised wages rose 4.1% on the year to July.

Proposed pay rates for jobs on the platform rose 0.4% in July, a rate similar to the previous two months, putting annualized wage growth at a rate of just under 5%.

That’s much stronger than the Australian Bureau of Statistics’ official wage price index, which showed annual wage growth of just 2.6% in the year to June.

Seek senior economist Matt Cowgill said it’s no surprise that advertised pay rates are rising faster than those of people staying in the same job.

“I would expect to see advertised salaries reacting more and more quickly to changes in economic conditions and broader changes in the labor market,” he told ABC News.

“When things go wrong, like they did in 2020, [employers are] aren’t going to reduce the salaries of their existing staff, but they might be much more willing and able to reduce, or at least limit, the salary growth they offer new hires. And that’s what we saw in our data.

“And, similarly, as the labor market recovered and things started to blow up through 2021, predicted wage growth accelerated much further and faster than overall wages and salaries such as measured by ABS.”

Mr Cowgill said there was no guarantee that advertised wage growth will ultimately be matched by wage growth for all workers, but it is a positive sign.

“The pick-up in announced wage growth that we’ve seen makes me think that the wage price index will continue to accelerate,” he said.

Other new economic research casts doubt on the extent to which wage increases for those who change jobs will raise wage levels overall.

The paper, by new economics think tank e61, found that the rate of job change in the economy each year had fallen significantly.

“The likelihood of the average Australian worker changing jobs (or ‘job-to-job transition rate’) has risen from 11.3% in the mid-2000s to 8.5% more recently,” he said. observed research.

“The job-to-job transition rate has increased during the recent labor market recovery, but remains well below the average rates seen before the GFC [global financial crisis].”

This decline not only directly dampens wage growth, as people who change jobs tend to benefit from larger wage increases, but also productivity growth across the economy, which could help raise wages.

“The propensity of labor to be reassigned to more productive firms has decreased,” the e61 researchers noted.

“This decline in productivity-enhancing reallocation may account for a quarter of Australia’s productivity slowdown.”

Young Australians are worse off

Moreover, the decline in job changes is particularly detrimental to young workers.

“The increased pay from changing jobs is particularly important for younger workers, given their greater need to find well-suited jobs in the early years of their careers,” e61 explained.

“Essentially, disadvantaged young workers tend to enjoy larger wage gains by changing jobs than those who are not disadvantaged.

“This may be because disadvantaged workers don’t have the networks to place them in lucrative, well-matched roles from the start.”

The think tank attributes much of the decline in job shifting to a decline in the competitiveness and vitality of Australian businesses.

“Business creation rates fell from 13% in the mid-2000s to 11% in the mid-2010s, while the employment share of start-ups fell from 11% to 8% over the same period – a trend that is pervasive across all industries,” observes the e61 report.

“These changes are important given that young companies are often more innovative and can put pressure on incumbents to improve.

“Young workers are particularly affected by the decline in firm entry, as young firms have a greater concentration of young employees within their workforce.”

This has meant that young Australians bear the brunt of a declining share of national income spent on wages.

Young workers are responsible for all of the recent decline in the share of national income devoted to wages.(Supplied: e61)

“The decline in labor’s share of earnings over the past two decades is entirely concentrated among younger workers,” the e61 report said.

Profit share growth debated

business meeting
Business groups say the declining share of wages in national income has been skewed by rising mining profits.(AAP: Patrick Hamilton)

Business groups have disputed the existence of a general trend of earnings growth outpacing wage growth.

The AiGroup analysis attributes almost all of the decline in labor’s share of national income over the past two decades to just two industries, mining and finance.

“For the remaining 82% of the economy, there has been no decline in labor’s share of income,” said the group’s chief policy adviser, Peter Burn.

“The decline in labor’s share of market sector income therefore does not support the proposition that firms in general have access to a larger share of industry income from which they can pay higher wages. .”

Ai Group published a separate article to refute the ACTU’s argument that companies have captured most of the productivity gains made in Australia.

The ACTU argued that real wage growth has lagged productivity improvements.
The ACTU argued that real wage growth has lagged behind productivity improvements to benefit businesses.(Provided: AiGroup)

Mr Burn said these claims are based on labor productivity and therefore do not take into account the contribution of business investment in new machinery and technology which has generated much of the recent productivity growth and for which , he argued, companies deserve to enjoy returns.

“Despite its name, ‘labour productivity’ over the past two decades has largely been driven by increased mining investment,” he said.

“It is therefore not surprising that wage growth and the evolution of labor productivity have been lagged during this period.

“In contrast, the multifactor productivity measure, which corrects for the increase in the amount of capital used in production, results in a much more rigorous and, in this case, much weaker measure of productivity improvement. .”

However, the e61 article finds that it is not just the mining industry where productivity gains appear to have benefited corporate profits more than workers’ compensation.

“The estimated degree of pass-through from productivity to wages has declined by nearly 25% over the past 15 years,” e61 found.

“For example, a 1% increase in revenue per worker was associated with a 0.19% increase in average wages in the mid-2000s.

“But the degree of wage pass-through has fallen to 0.14% by 2020.

“The decline in pass-through occurred across all industries, but is most striking in the accommodation and food services industry where the degree of pass-through fell from 0.31 to 0.20%) .

Which industries are seeing the biggest pay rises?

It’s perhaps unsurprising that design and architecture, information and communications technology, and trades and services have seen the largest wage increases announced in the past year.

These are the only three sectors where wage increases have matched or exceeded the inflation rate of 6.1%.

Seek's advertised salary index figures are broken down into 27 industry categories.
Seek’s advertised salary index figures are broken down into 27 industry categories.(Provided: seek)

Science and technology was the weakest sector, with pay for advertised jobs rising just 0.6%, while government, education and training, community services and legal positions all rose. recorded increases of less than 2%.

“There’s just a lot more inertia when it comes to wages and salaries in the public sector, and what I mean by that is just that the rate of growth tends to differ less and move a bit slower in either direction,” Mr Cowgill said. .

“Partly reflecting the fact that wages and salaries are usually set by company agreements, which are only renegotiated every few years.”

However, in all but the highest-paying sectors, wage growth remains below inflation, even for workers who change employers to obtain a higher wage increase.

Find average full-time equivalent salary by industry
Figures from Seek showed workers in IT, mining and consulting had the highest average salaries, while retail and hospitality were at the bottom of the pay scale.(Provided: seek)

Seek’s figures also seem to indicate that the labor market could be approaching its peak with the level of wage growth stabilizing, albeit at just under 5% per year.

“Over the past few months, we’ve seen something of a plateau in that monthly growth rate,” Cowgill observed.

“We’ve seen that in our job ad numbers as well. So small dips in June and July in job ad volumes, but overall kind of plateauing at a very high level.”

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