AUSTRALIAN warehouse workers are preparing to walk off the job to demand higher wages and greater job security, in a sign that a strengthening labor market could be emboldening employees.
Some 2,000 people from retailer Woolworths Ltd. depots in the states of Victoria and New South Wales are seeking a vote on industrial action, according to the National Union of Workers. Among the employees’ key demands is a A$2 an hour pay increase — depending on pay levels and experience, that could add up to a hike in excess of 6 percent a year for some workers.
“This could be a canary in the coal mine,” said Andrew Boak, chief economist for Australia at Goldman Sachs Group, Inc. “When you sit back and reflect on the strongest labor market that we’ve seen in 10 years; corporate profits pretty close to a 33-year high; surveyed levels of business conditions at decade highs; and the global backdrop improving considerably; it’s entirely feasible you’re seeing a positive inflection point in wages.”
Australia is stuck in a developed-world rut of weak wage growth and anemic inflation even as hiring surges. The share of national income going to capital is near a five-decade high as productivity outpaces pay gains, while the share going to workers languishes at a five-decade low, Reserve Bank of Australia Governor Philip Lowe has said. He maintains that global competition and the rise of automation are spooking workers out of seeking pay rises.
Until now, perhaps.
“Woolworths makes enormous profits each and every year, and our members want a fair share of that,” National Union of Workers officer Dario Mujkic said. “Today, we see inequality growing. The system is broken. Hundreds of thousands of workers are trapped in a system of casual work; hoping for shifts, never taking holidays, fearful they will lose their job if they get sick.”
In Victoria, workers at three Woolworths warehouses are seeking higher redundancy pay and the right to retrain and transfer in the event of job losses and shed closures. One center is due to shut in the next 12 to 18 months and employees want the opportunity to be redeployed at another being built in the state. However, it will likely hire fewer people due to greater automation.
“Workers feel like there are more competitors out there,” RBA chief Lowe said during a discussion at the Australian National University in June. “They’re worried about the foreigners and the robots and when any of us feel that there is more competition, you’re less inclined to put your price up.”
The irony is that Australia’s labor market is going gangbusters: jobs growth is running at an annual 3.1% equivalent to US nonfarm payrolls surging 379,000 a month, according to Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney. The Australian jobless rate has dropped to 5.5%, matching the four-and-a-half year low reached in May.
As unemployment falls, “at some point one imagines that’s going to lead to workers being prepared to ask for larger wage rises and if that were to happen, that would be a good thing,” Lowe said. “If we can put the pressure on the labor market, that might energize workers to overcome these fears of competition and uncertainty.”
Australian Treasury Secretary John Fraser echoed those sentiments on Wednesday, telling a parliamentary panel that he was seeing “pockets of wages growth.” These included the construction sector and associated industries in both Victoria and New South Wales.
“I don’t want to over-egg it, but I think it is starting to pick up a little,” Fraser said. “That has been the experience overseas.”
Reflecting the price weakness in the economy, third quarter inflation data Wednesday showed headline and core prices failed to meet economists’ expectations on both a quarterly and annual basis.
The National Union of Workers said its potential strike action comes as the casual work force soars and wage stagnation spurs commentators across the political spectrum to encourage workers to seek a pay rise. Wage growth Down Under is at the weakest level since the country’s last recession in 1991.
“Members know from experience that asking big companies for a pay rise doesn’t mean they will give you one, and the only way to secure wage increases, secure jobs and improved conditions is by taking collective action,” said union officer Mujkic.
Woolworths “will continue to work with our team members and their chosen representatives to get the right outcome at each of our sites,” a company spokesperson said by e-mail.
Meanwhile, Australia’s Fair Work Commission in June awarded a 3.3% increase in the minimum wage. Goldman’s Boak estimates that decision will impact 40% of the labor market and lift third-quarter wage data due out in November.
He’s predicting the RBA will raise interest rates for the first time in seven years in February, well ahead of market pricing that sees a better than 50% chance of a hike in July at the earliest. Boak says the broader factor has been the “disinflationary force on wages” from a multi-year fall in the terms of trade.
“Not only has that headwind eased, it’s actually turned into a significant tailwind,” said Boak. “So moving forward we’re not talking about wages growth surging back up to 4%, but we are talking about a material positive inflection point, which we think is the final piece of the puzzle for policy makers looking to start a very slow and shallow process to normalize rates.” — Bloomberg