Wages must be reduced

 

five dollar notes, moneyI recently attended a forum and got talking to the chief economist of one of the big four banks. My question to him was very simple. “Can wages and rents be sustained in Australia”? We were of course talking in the retail context.

As I learnt from one of my mentors a year or two ago, and now confirmed by this learned man, the answer was no.

He didn’t go so far as to say that wages would come down, but he did say that technology would drive wages down. For example, cashier-less checkouts.

I was not going to debate the issue – checkout wages are a factor, but it is minimum wages across the board that hurts.

The following day I posed the same question to the delegates.

Outrage is too strong a word. Dismissive will probably have to do. Or pity – only a person of unsound mind would suggest a notion so preposterous – that wages must come down.

Through Wikepedia I researched the official minimum wage in 197 countries and territories. This is not an exact science. The study was conducted in 2012 when the US dollar was weaker and some countries have complex minimum wage structures (India has more than 1200!).

But those who prepared the study did their best. They took gross wages before tax and social security contributions. They excluded paid days off, public holidays, sick pay, and annual leave.

Warts and all (and there are many), the findings can best be described as a rough barometer of international minimum wages.

And this is what it looks like taking just the top thirteen countries.

Screen shot 2013-11-15 at 9.19

A few comments.

The annual wage rate in Australia is more than 12.5 per cent higher than the next country on the list.

Australia is 67 per cent higher than the UK, and 120 per cent higher than the US.

Casting one’s eye down the hourly rates, a similar picture emerges.

Now have a look at the working week. Only two countries have shorter working weeks. And Canada’s working week is 16 per cent longer than ours.

If you are tempted to comment on the veracity of the numbers, you have missed the point.

The point is that we are hopelessly out of kilter with the real world, whichever way we look at it.

Dozens of extenuating factors can be cited – our wonderful way of life, unparalleled medical facilities, a sound education system, and the list goes on (although many complain that we need better).

But the bottom line is the top line in the table.

We are an expensive country and we cannot sustain our wage structure.

Something has to give.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

 

 

 

 

 

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Comments

21 comments

  1. Charles Paine posted on November 15, 2013

    What would the Australian wage be if the Australian $ was worth $0.66 US. the high value of the AUD is distorting the figures.

    • kevin posted on November 15, 2013

      i am from the usa and have friends and relatives there still. if anything the usa wage is slightly higher on this list.

  2. Jon posted on November 15, 2013

    Now you should do a similar comparison for retail rents and the general public can get an idea why we are so much more expensive than the purchases they make online from overseas countries. Save a buck today and be unemployed tomorrow. Something has to give. There is no way in hell the unions are going to allow a wage reduction so the writing is on the wall,, pay more and buy from Australian stores or be unemployed and buy from overseas stores.

  3. Michael posted on November 15, 2013

    why the debate? I employ people in my retail business and pay well above minimum/award/whatever because I know if I pay them well they will sell more and less likely to have a sickie etc My main costs are like other businesses - high insurance (the levie added on by government), payroll tax, compulsory workers comp, and of course rent and rates. The actual salary and super I can easily factor into the business and either employ more or reduce staff numbers to reflect turnover it makes me laugh when some CEO or government treasurer gets on his high horse about low paid workers 'high' wages when do we see the comparison between their salary package and their overseas opposite number. Not only do our MPs get rewarded much higher than other countries they are much more likely to move on to high paid consultancy afterwards whilst still getting huge super Alan Joyce was a classic - trying to drive down costs yet when it was put to him the ratio between qantas baggage handlers and his CEO package was grossly greater than the similar ratio of the staff and CEO of Singapore Airline, he quickly ended the interview. We really need to ask ourselves if we want a more equitable society (let's be honest if we paid $8/hr we would never find staff - they wouldn't be able to afford rent/transport/living costs) or the USA style where half the population cannot afford healthcare and commit crimes to survive

  4. Owen posted on November 15, 2013

    Surely it is important to compare to productivity too. I agree that in some areas - manufacturing especially - we have probably priced ourselves out of the market (the car industry is unsustainable at current wage rates). But I am sure that we have very competitive wages in other industries - service, tech etc - and are being productive in these fields. My suggestion with regard to manufacturing, is that we should look to re-tool our underperforming industries and look to compete on high value/high profit products - maybe even, dare I say it, weapons manufacturing. It would be a great shame to have all that manufacturing knowledge and equipment go to waste.

  5. Pat posted on November 15, 2013

    I'm with Michael. Profit at the expense of generous staff remuneration and conditions isn't great economic management - it's exploitation. GDP per head is higher in Australia so wages are higher. If GDP per head was one tenth what it is currently then wages would be lower. Isn't the point of growing the economy to increase the wealth of its citizens? Or is that just some of its citizens Stuart? My company pays its staff more than 30% above the award and then there's a profit share program on top. The company's grown by an average of 30% for the last ten years. The culture of "us and them" perpetuated by articles such as this one and the comments by the muppets at the head of Abbott's Business Advisory Council belong in the nineteenth century along with satanic mills and cholera.

    • Loose Rooster posted on November 15, 2013

      +1 to Pat & Michael

  6. Buzz posted on November 15, 2013

    Jon you have hit the nail on the head. Australia is pricing itself out of the market.

    • kevin posted on November 15, 2013

      absolutely. i have found the australian retail worker to be self entitled, over paid, unreliable and uninterested. why should i pay someone with one days experiance $22 per hour plus all the luggage and then watch them take off after 3 weeks because it is to hard. the wage should be $10 per hour plus commision.

  7. Debra posted on November 15, 2013

    A beautiful reply Michael... I cannot believe the "article" thinks 33K is overpaid... There are so many other factors.. adding to the costs including extremely generous top level saleries.The bottom hourly rate to the employee is not where it should be cut.. really! they think $16.88 an hour is over the top!! This is the most awful report I have read for a while.. I mean, how dare those retail employees think they deserve a reasonable existence...! I don't know fancy giving them healthcare, education, & they can even afford reasonable quality food and not existing on a $2.00 burger from a rubbish takaway.. what is the world coming to. Grrrrr

    • kevin posted on November 15, 2013

      remember that the list is in us dollars. if everyone from the top to the bottom took a pay cut then prices would have to come down. are things in australia overpriced for what you get sometimes. sure they are. but that is because of running cost which a big part of that would be wages.

  8. Jonty posted on November 15, 2013

    Michael and Debra you probably run successful businesses that's why High wages is not really a concern for you but what about those thousands of businesses that have hit the wall because they cannot afford the cost of Labour. Stuart Bennie has painted the picture very clearly and the conclusion is that Australian Wages are too high and are unsustainable!!! P.S. I also run a very successful retail business hiring 11 employees and every employee get the what they are legally entitled to.

  9. Ev posted on November 15, 2013

    Today, of all days, is not the right time to publish this. Rudd has just resigned. He'll cost us a small fortune to replace him. For a few measly years on the job he walks away with over $3000+ a week for LIFE! I have worked hard in my current role as owner/manager of a small business for over 20 years. I get neither annual holidays nor sick days. No lunch breaks or trips away paid for by someone else. I worry day and night about keeping afloat and paying all bills. Stop the rot and rorting at the top FIRST! Sack all the public servants who sit on their fat assured pay packets and write yet more nit-picking legislation with the sole purpose of finding ways to spend MY money on meeting THEIR ridiculous rules and regulations. Am I angry?? Too right!!

  10. Loose Rooster posted on November 15, 2013

    Sure we get paid more.... but everything is also more expensive. So which drops 1st, the rents or the wages? When wages come down, so does spending.... and then all you hear is Myre and good old Gerry Harvey crying foul. The elephant in the room is Westfields. They are the ones driving up rents, hence prices and hence wages to afford the goods. They are the ones killing off competition of small business outside of Westfields (i.e. malls and the like). They are the ones that give deals to Coles & Wollies (Duopoly) to retain the stranglehold over the retail market and all the customers. They have everyone a slave to them. Which they then increase the rents, which in turn increase the prices of good etc etc, and round and round it goes until we are at the point we are now. In any case, when the AUD returns to more normal levels (i.e. sub 75cents USD). Then everything will be returned to normal. The headline figure of $16.88 reduced to 16.88x0.75=$12.66 or in line with the rest of the world. At the same time the price of good will increase with less shopping for good online via OS.... Im guessing though Gerry will still be complaining....

  11. Jonty posted on November 15, 2013

    I hear your cry Eva. After 20 years you deserve a lot better than what you are getting. Some fresh faced school leaver who can not even do half the job you are doing will get paid more than you. How is that fair? Loose Rooster Westfield is not the only Shopping Centre Owner/Managers in Australia. Most big shopping centre companies have a distorted idea of Market Rent. I think Wages/Rents have to come down before the price of goods can come down.

  12. Julian Josem posted on November 15, 2013

    Stuart, I can’t help but think that your piece has prompted greater response than other articles because it is of a topic where there just isn’t a single right answer to the question of whether or not retail worker wages are at the right level. You seem to dismiss the fact that wages for retail staff is relatively high or low in this country compared to other countries depending as to the comparisons made. You intimate that in terms of “value” to the retailer, wages are too high; rents are too high; Government costs are too high. Of course if you keep everything else constant and lower wages, then at first glance, most retailers in Australia that would think they would benefit by a lowering of the wage bill. On the other hand, if you could keep everything else constant in your theoretical world you live in with the fairies that live in the bottom of your garden and increase retail staff wages compared to CPI or other such index , then with the extra money in their pockets, workers might spend more. They might also (likely) be more productive. In other words, there is likelihood that retailers would actually be better off by taking a counter-intuitive position. So while it makes for a good discussion, I can’t help but think that here is another article aimed at raising the blood pressure of both retailers and workers for no possible good outcome. One/some of your readers made the connection about productivity. I like that thinking. A key aspect of good retailing is about managing/improving productivity. There are many ways to increase productivity, but considering wages in a stand-alone report like you have done is putting in peril the serious work our good retail management teams perform, and as has been shown up in the feedback to your article. It inflames a poor standard of debate because such data fuels emotional arguments and class warfare. In my opinion, the statistics you quote tell you absolutely nothing of worth. I look forward to a more principled article from you next week.

  13. Andy Wilson posted on November 17, 2013

    Would Stuart Bennie like his salary reduced then too? Lowering peoples take home pay is a sure way to lower their quality of life, which in turn reduces the overall wealth of this country. We are lucky to be in one of the wealthiest countries in the world, and our relatively high wages and salaries are one of the reasons for that.

  14. Penny Votzourakis posted on November 17, 2013

    We want quality people choosing a career in retail. Salespeople are the most important asset in the business. Staff that are treated well and respected will treat customers well. Retailers must invest in their people, not treat them as second class citizens.

  15. Rana posted on November 18, 2013

    Whilst I agree the minimum wage should be high and than in turn it creates a cycle of spending however it shouldn't be so high that it is unsustainable. At the moment it is sitting on the verge of it becoming unsustainable. Big retailers have adopted to absorb it my bringing in self serve checkouts but where does it leave small retailers? Mr Andy Wilson im sure Stuart Bennie is not paid by the hour hence the minimum Wage does not apply to him. Please try to make a valid point instead of a personal attack.

  16. Peter posted on November 20, 2013

    I don't see any Scandinavian countries on that list and I question the inclusion of Luxembourg, San Marino & Monaco. My staff are paid above that minimum and deservedly so. As pointed out in other comments, the strength of the dollar is a large factor in that comparison and by far the better comparisons out there revolve around purchasing parity rather than dollar against dollar comparisons. Rent, Utilities, Insurance, Bank Fees & Charges, Telecommunications, Council Rates, Transport, etc that are seemingly oblivious to (and increase exponentially to) the CPI are what I rail against.

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