The Nordic Edge: Policy Possibilities for Australia by Andrew Scott & Rod Campbell

Author:Andrew Scott & Rod Campbell [Scott, Andrew & Campbell, Rod]
Language: eng
Format: epub
ISBN: 9780522877625
Google: O8EnzgEACAAJ
Publisher: Melbourne University Publishing
Published: 2021-07-15T00:18:41.967524+00:00

WAGES AND WAGE BARGAINING

Workers’ wages in Australia hardly increased, growing at levels similar to inflation from 2014 to the onset of the coronavirus crisis in early 2020.23 Between 2000 and 2019, Australia’s wages rose 17.9 per cent, whereas wages rose 19.1 per cent in Finland, 25.5 per cent in Denmark, 35.4 per cent in Sweden, 43.6 per cent in Norway and 33.3 per cent in Iceland.24

When we look longer term at wage trends, wages in most Nordic countries consistently rose from the early 1990s through to 2019 and were not significantly affected by the Global Financial Crisis (GFC) of 2008–09, nor by minor fluctuations in GDP or inflation.25 Sweden, in contrast to many countries, saw wages rise steadily from the mid-1990s until the GFC, then saw wages rise again after it.26 While Australia’s wage growth between 1990 and 2008 also showed a rising trend, this changed from the time of the GFC.27

In addition to encouraging workforce participation, this higher wage growth in the Nordic countries has contributed to them maintaining significantly better income equality than Australia and other English-speaking countries. When the disposable money income of different households is compared, in the five Nordic nations the highest 10 per cent of income earners get, on average, three times what the lowest 10 per cent of income earners get. In Australia, the top 10 per cent get nearly four and a half times the lowest 10 per cent. In the United States, the top 10 per cent get more than six times what the lowest 10 per cent of income earners get.28

To understand the differences between the performance of Australia and Nordic countries in terms of wage growth and equality, and how Australia can improve, it is necessary to examine the policy settings relating to wage bargaining and setting. Wage bargaining in Sweden, Finland, Denmark, Norway and Iceland takes place primarily on an industry-wide basis: that is, across an entire sector. By contrast, in Australia, since the early 1990s wage bargaining has become primarily centred on individual enterprises. The sector-wide bargaining in Nordic countries achieves higher employment, lower unemployment, a better integration of vulnerable groups and more equal wages than countries with decentralised wage-bargaining systems.29

In Sweden, agreement is made between employers and unions about what proportion of the anticipated productivity gain in the economy as a whole will be shared between labour and capital. A wage increase known as ‘the mark’ is negotiated in the sectors of industry most exposed to international competition, and for a given period (e.g. 1–3 years), which then acts as a national norm that flows through into collective agreements covering other industries throughout the economy. The mark is based on the anticipated productivity increase and inflation. A productivity gain refers to the increase in output an economy can achieve over time with the same level of labour (or other input). This increase comes about due to better technology or knowledge, or other improvements to labour, capital and the production process. If the productivity gain over a

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