Mining wage

How record mining profits are distorting the wage debate

“There’s a lot of talk about ‘excess earnings’ at the moment and some people are pointing to an increase in capital’s share of earnings as evidence of that,” Dr La Cava said.

“But to find out the truth, you have to look beyond the ABS national accounts headlines.

“The rise in the share of corporate capital in recent years is due to two sectors: mining and finance. When you eliminate these sectors, the capital share has been stable for some time. »

Total corporate profits have increased as a proportion of national income, from around 20% in the late 1950s to around 30% in 2022, according to the ABS.

But Australia’s mining boom and the monster profits generated recently by record iron ore, coal and liquefied natural gas prices have skewed the data.

When mining is removed from total profits, the story is very different. Non-mining profits have fallen from around 22% of total factor income in the early 2000s to around 18% this year.

Illustrating the magnitude of recent gains, mining profits as a percentage of current (nominal) gross domestic price also exceeded non-mining profits for the first time earlier this year, according to data released by the RBA.

Mining employs about 2% of the workforce, or just over 250,000 people, and only these people can benefit from wage increases from their employers.

Salaries still within range

The one exception to the overall plunge in non-mining sector profits as a share of revenue was a spike during the height of the COVID-19 pandemic when results were bolstered by the $89 billion JobKeeper program.

This was particularly evident in sectors such as retail where businesses received JobKeeper but benefited from an increase in demand for many goods.

A Treasury review of JobKeeper found that 75% of the money paid out in the first three months acted as a wage subsidy for employers, as opposed to an income transfer to employees as intended.

With respect to wages, total compensation of employees has fluctuated between 50% and 56% of total factor income for most of the past half century, except for several major peaks in the 1970s and early of the 1980s.

Known as “real excess wages”, it was these spikes that prompted unions to agree to a wage freeze to lower the ratio and thwart inflation at Bob Hawke’s 1983 economic summit conference.

At Prime Minister Anthony Albanese’s Jobs and Skills Summit in Parliament on September 1-2, unions will say the issue today is a ‘real profit surplus’.

“We can see that wages are not changing, they are not keeping up with increases in productivity, they are not keeping up with business performance,” Ms McManus said. The Australian Financial Review Last week.

Ms Westacott accused unions of crafting an ‘us versus them’ narrative by focusing on a ‘simplistic’ view of workers’ falling income shares.

Regardless of what official data shows, a 2.1% drop in real wages in 2020-21 and another big step backwards expected this year – largely the result of soaring inflation – will keep wages going. at the center of the debate,