Perks replacing pay rises, Reserve Bank says
The Reserve Bank has held out little hope of a quick end to stagnant wage growth, saying even employers keen to hire workers are reluctant to push up wages.
The assessment, from the bank’s chief economist, Luci Ellis, comes after seven consecutive quarters of wage growth at or near 2 per cent and a forecast in the government’s December budget update of an acceleration to 2.25 per cent.
“Our forecasts are for wage growth to pick up from here, but not immediately and then only gradually,” Dr Ellis told the Australian Business Economists’ annual meeting in Sydney.
“We are seeing some signs of labour market tightening in the business surveys, which are telling us that suitable labour is becoming increasingly difficult to find.
“So far, though, the response to that difficulty has not been to pay people more to ensure they stay, or poach them from elsewhere.”
Dr Ellis said employers were increasingly using other “creative” ways to attract and keep staff that didn’t push up their entire wage bill. These included everything from hiring bonuses, to offering extra hours, to increasing perks and workplace conditions.
“Even when facing strong demand and rising cost pressures, firms seem reluctant to raise their prices,” Dr Ellis said.
“This is a theme from our liaison with the business community. They appear to believe that competition is so intense that they would lose too much business.”
Her comments echo those of Reserve Bank governor Philip Lowe, who told international financiers last week that whenever he asks Australian business leaders why they are not paying more wages, they reply that they would do so only “if other people paid higher wages”.
“You’ve got to understand, we are in a very competitive industry and we can’t possibly pay higher wages if others don’t,” he said they tell him.