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Why can't we just make pay rises mandatory?

When was the last time you got a pay rise? Or more to the point, when was the last time you read a story in the media about “stagnant wages”?

Yeah, sorry, this is another ‘is your pay going up?’ column. However, I think you might find this interesting.

You see there’s now a growing movement to boost everybody’s pay packets. Well maybe not the pay packets of the well-heeled, but certainly those Australians who are struggling.

It’s about forcing your pay packet up, and giving workers who don’t have many rights, more rights, and protections.

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ACTU makes a move

The ACTU is the Australian Council of Trade Unions. It’s a powerful group that stands up for workers’ rights.

The secretary of the ACTU, Sally McManus, recently delivered a speech pushing for a new system of enterprise bargaining and wage price negotiations. She also wants greater protections for workers in the GIG economy – you know like those guys on the mopeds you see with the Deliveroo backpacks.

In the old days, an independent umpire used to bring warring parties together who couldn’t settle a pay dispute. Sally McManus says she wants to see someone similar again, because, as she puts it, the system is broken.

Well, specifically, she says the Fair Work Act (which governs the employee/employer relationship in Australia) is broken. She also says protections for workers are failing, and the award system is a “joke”.

In other words, she’s saying if you’re a worker, and you’ve got a difficult boss, you haven’t got a hope of getting a pay rise. That’s pretty heavy stuff.

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Can she make any headway? Well, yes, if she can convince Canberra of the merits of what she’s saying. Various governments have changed Industrial Relations laws to bring workers more peace of mind. Some have been more successful that others. Bob Hawke introduced the Prices and Incomes Accord, which, for a time, really helped workers out. That was an agreement between the ACTU and the government. Maybe that can be repeated?

How did we get here?

It’s going to sound cliché but this does all relate to the global financial crisis.

The crisis, as you’d expect, knocked the wind right out of business confidence (right around the world). Business profits have since picked up, but businesses remain a bit cynical about their future prospects.

So rather than rewarding workers with higher wages, they tend to squirrel money away. Wouldn’t we all in the same position? Imagine if the economy did turn down, and you just handed out a whole bunch of pay rises… you’d be kicking yourself.

The problem is the decision by businesses to hold onto the extra cash also hurts the economy, and thereby hurts demand (and their sales). It’s a tricky one!

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The good news is that the economy is humming along quite well, and jobs are being created. So, the BIG question is, how may more jobs will need to be filled before there is more demand for workers than there is supply of workers? – because that’s when you can really effectively bargain for a pay rise!

Realistic to get pay rise in this climate? 

Here’s where I’m going to throw a bit of economic jargon at you. The economic concept is NAIRU (Non-Accelerating Inflation Rate of Unemployment). ‘What the’? I hear you say.

It’s simply the magic level of unemployment where you start to see wages, and inflation tick up. It looks like the United States MAY have hit that point. Australia hasn’t. The Reserve Bank thought it may have been at an unemployment rate of around 5.5 per cent. It looks like it’s much lower than that because neither inflation, nor wages, are budging at the moment.

So is it realistic to get a pay rise in this climate? Totally depends on what industry you’re in but, in a word, no. Can we legislate for it? Possible, but the case made to Canberra needs to be convincing. There is, however, a good precedent for it.

How do you ask for a pay rise? (getting it done yourself)

Every company can be valued. That’s how a stock market can exist. Equally, every employee can be valued. The key to asking for a pay rise is to know your worth – quite literally.

Many employees, I think, are still grateful to have a job. That’s possibly a legacy from the global financial crisis. Either way, it’s silly. If you’re adding more and more value to a company, you should see a return for that.

So, ask yourself: what have you done to add to the company’s bottom? Have you boosted sales? If so, can you put a percentage figure on it?

It’s just basic business sense that employers will try to get as much as they can from employees for as little reward as possible. So you have to make a convincing case that you’re integral to the company’s growth trajectory, and that you won’t stick around unless that’s rewarded financially.

Also, it’s extremely unlikely you’ll get a ‘yes’ on the spot.

Risky times

Wage growth in the US was central to last week’s stock market volatility. I’d argue there hasn’t been this much discussion about people’s pay packets for some time. Folks’ earning potential has never been so important.

If there was ever a time to have a discussion about reforming industrial relations (wages) regulation, it’s now.