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Productivity fall behind wage stagnation

Productivity fall behind wage stagnation

New figures have shown a fall in labour productivity in Australia, which could help to explain why employee wage growth is hovering around record low levels despite profit growth and rising work hours.

The Fair Work Commission’s Annual Wage Review 2017-18 revealed a 1.0 per cent fall in labour productivity for the December quarter of 2017, despite business profits surging by 4.3 per cent.

That compares with the five-year average of a 0.8 per cent increase in productivity.

However, offsetting this productivity slip is an increase in the number of total hours worked, which has surged by 3.5 per cent in the same quarter – the highest increase in the past decade.

It comes after a recruitment report found that more than half of workers are expecting a pay increase in 2017/18, contrary to the expectations of many employers.

Nevertheless, Australian business has collectively seen a modest boost in productivity in recent years, increasing 1.9 per cent between the 2012 and 2017 financial years, and the same proportion over the last decade.

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A breakdown of productivity by industry found that in the five years to fiscal year 2017, mining was the standout performer, up 10.1 per cent. Although this result is likely to be somewhat skewed as the industry gets back on its feet from the massive post-GFC collapse in the sector.

Unsurprisingly, given the recent property boom in east coast markets, the rental, hiring and real estate services sector was the next best, increasing 5.6 per cent.

Other noteworthy productivity boosts were recorded in the wholesale trade (up 4.9 per cent), information, media and telecommunications (also 4.9 per cent) and agriculture, forestry and fishing (up 3.6 per cent) industries.

The only industries to record falling productivity over the five-year period were construction (down 1.6 per cent) and manufacturing (down 1.2 per cent), while the “other services” category – excluding hospitality, energy, financial, property, professional, administrative and recreational services – also fell 1.2 per cent.

Productivity fall behind wage stagnation
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