Comment: Not with a bang but a whimper: what wage explosion?

National Secretary of the Australian Workers Union Paul Howes addresses the Press Club in Canberra Wednesday, February 5, 2014. (AAP)

AWU chief Paul Howes has called for a 'grand compact' between business and unions in an effort to broker a truce on industrial relations - but that will never happen in the age of the soundbite.

A week ago the front page of The Australian newspaper featured an article headlined, 'Pay deals ‘risk wages explosion’'. The article detailed an interview given by the Minister for Employment, Senator Eric Abetz, in which he stated that if unions and employers didn’t take responsibility for the cost of the bargaining deals then 'we risk seeing something akin to the ‘wages explosions’ of the pre-Accord era, when unsustainable wage growth simply pushed thousands of Australians out of work.'

The seventh paragraph of the article somewhat destroyed all that came before it (including the headline), when it was noted that 'His warning came despite the fact that nominal wage growth has been very weak on both the Australian Bureau of Statistics’ national accounts and wage price index measures.'

It’s surprising that such an interview by Mr Abetz would be front page news, because it’s the same spiel he has been spouting for a number of years.

In May 2011, for example, he said in a speech to the Australian Industry Group,  'The Coalition is concerned that we will see huge levels of wages growth across Australia if action is not taken to ensure sustainable pay increases.'

In the time since he gave that speech, the Wages Price Index has averaged annual growth of 3.4% - the lowest average growth over a such a time period since 2002.

Interestingly, his comments about unsustainable wages spreading across Australia were said in relation to the wages of workers on offshore oil rigs. In 2010 the fact that some workers were earning $2,000 a day got a bit of mention in the media, and Senator Abetz raised it again in his speech.

Coincidentally Paul Howes in his speech to the National Press Club on Wednesday also referred to offshore workers when he suggested that 'some isolated parts of the economy' were showing 'unsustainable growth in wages.' He noted that 'the leap-frog wage outcomes in the offshore sector in particular are not going to be sustainable for the long-term – we could be pricing ourselves out of the market.'

Now, this is quite a turnaround for Mr Howes. Back in 2010 he was quoted as saying of such deals:

'I make no apology. We are a union, and our job is to secure good wages and conditions for our members. If we know we can get it, we will get it.'

Not surprisingly, Mr Howe’s words were used against him and against the ALP. Mostly this was because his words were largely taken out of context.

Mr Howes had specifically stated 'some isolated parts', and the 'offshore sector in particular'. But this quickly became represented as being much broader. On ABC News Radio, one journalist while interviewing Greens deputy leader, Adam Bandt, suggested that Mr Howes had said 'many workers are pricing themselves out of jobs.'

And this is the problem with Mr Howes’s overall dream of a 'grand compact' between business, unions and government. It won’t happen while the post-fact political world remains.

Right-wing media and politicians have been seeing a wages breakout coming since before Kevin Rudd became PM.

It never came.

Right now annual wages growth across the economy of 2.65% is the lowest it has been since the ABS began calculating the wages price index in 1997. Every single industry at the moment is experiencing lower wage growth now than it was in 2010 when Mr Abetz expressed his worry about 'huge levels of wage growth.'

But here’s the part of Mr Howes’ speech that was missed in the gloating by Tony Abbott and others. He suggested, immediately after talking about the 'isolated sectors':

'On the flip side business could concede that on the whole, economy-wide – wages growth is at the lowest level that is has ever been - and industrial disputation is at record lows.

Perhaps they might agree – penalty rates and the minimum wage are fundamental planks of our social contract and should remain.'

It was somewhat odd that Mr Howes might think this would occur. Instead, Tony Abbott when asked about it said, 'What Paul Howes did yesterday was essentially pull the rug from out of the Shorten scare campaign. Everything that the Labor Party has been doing since the election, everything they're doing now in the Griffith by-election, it’s just one big scare.'

Well, no, it wasn’t just a scare – especially when the Government’s submission to the Fair Work Commission’s review of modern awards explicitly targets penalty rates.

But the totality of what Mr Howes said really doesn’t matter. His one, quite couched, statement on wages was enough. And it did pull the rug out from Shorten’s 'scare campaign' because in today’s political debate we only focus on one sentence of a speech and not the context.

I think someone as experienced as Mr Howes really should have known this would happen when he said it; to hope otherwise was pretty naive given politics over the past 5-6 years.

But the response to his speech by all sides, demonstrated clearly that there is no way there will be a 'grand compact.'

And if you doubt this, just ponder how many government MPs or business leaders since mr Howes’s speech have admitted that 'on the whole, economy-wide – wages growth is at the lowest level that it has ever been.'

To do so would be to utter a truth. Something rare and seemingly unnecessary in today’s political world. 

Greg Jericho is an economics and politics blogger and writes for The Guardian and The Drum.

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