Mining wage

Corporate fear of rising wages ‘makes no economic sense’ after record profit, expert says

The corporate sector still appears healthy, while worker compensation growth remains well below the cost of living.

The latest data from the Bureau of Statistics shows that in the three months to June, gross business operating profits rose 7.6%, seasonally adjusted.

If you factor in inventory (inventory still in inventory), corporate profits rose 8.6% in the quarter, to be 26.2% higher on the year.

This is the largest increase in corporate profits in five years, according to Commsec analysis.

Mining profits rose 14.3%, helped by higher commodity prices.

Manufacturing sector profits increased 10%, accommodation and food services profits increased 48.8% and total transportation sector profits increased 23.8% in the quarter.

Construction profits fell 5.7%.

“As we highlighted in the summary of the recent earnings reporting season, Australian businesses are in good shape, weathering a storm of challenges such as supply chain issues, a tight labor market, rising inflation and rising interest rates,” Commsec noted in a research report.

“The 17.8% increase in 2021/22 profits was the largest annual gain in five years.”

Salaries only increase by 3.3%

Workers or employees, however, continue to fight for decent wage increases.

Wages and salaries rose 3.3%, seasonally adjusted, according to the ABS.

“The biggest increases in wages and salaries have been concentrated in sectors still recovering from COVID.”

“These were accommodation and food services – 12.3% – and arts and leisure – up 8.1%,” noted the Commonwealth Bank’s economics team.

“These two sectors are only 1.8% and 3% above pre-COVID levels.”

Inflation is currently 6.1%.

“The Great Elevator [in wages] reflects both changes in hours worked (including via additional headcount) as well as changes in pay rate and bonuses,” the ABC noted.

In other words, as pay rates increased, the higher wages also resulted from more people working and those who were working putting in significantly longer hours.

“The workforce increased by 0.9% in [the second quarter] and hours worked by 4.6%,” the ABC said.

“There is no economic logic here”

Leonora Risse, lecturer in economics at RMIT University, said take-home pay increases could largely be tied to workers who weren’t entitled to sick leave returning from COVID-19 isolation. .

But she said this latest data exposed a line often trumpeted by companies that they simply cannot afford to hand out bigger pay rises right now as misleading.

“There is no strict link there – there is no economic logic there [that higher profits lead to higher wages]“, said Dr. Risse.

“Wages are determined by supply and demand in the labor market.”

But Dr Risse said corporate margins were “pretty healthy”.

“This is not consistent with the reasoning that [they] cannot afford to pay workers more,” she said.

More earnings and payroll data will be released on Wednesday along with the latest national accounts figures, including gross domestic product for the June quarter.