Union Advocates for Real Wages Cuts!

I’ve been enjoying a period of annual leave but today I got word the Queensland Teachers Union (QTU) was advocating for real wages cuts! (source)

Wage increases in Australia are determined by varying methods. Award wages determine the minimum wage and increases are made on an annual basis by the Fair Work Commission after considering the submissions by interested parties and making a decision based on the framework determined by the Fair Work Act. In practice it is a political process with an ideological bent in favouring capital but I’ll stop there because that is a deep deep rabbit hole we don’t need to go down.

The other method wages are set is via enterprise agreements. These are negotiated between employers and employees (usually represented by a trade union) and voted on by all staff. Though an employee can choose to represent themselves (non-sensical under a collective agreement) or employees can choose to appoint any other party. Often workers unions are sidelined from the process and sometimes not even informed negotiations have begun! The move from awards setting market conditions to enterprise bargaining where employees have to negotiate by employer rather than negotiate via profession was a move that helped break solidarity amongst the working classes and is far more resource intensive. Instead of say negotiating one agreement that covers a profession, trade unions need to negotiate agreements with each individual employer.

Although Australia has moved to a national legislative framework for wage determination. The States still have jurisdiction and a legislative framework with their state industrial bodies. These only apply to state or local government employees. So Queensland state teachers use a different (though similar) framework to Queensland Catholic school teachers.

Real vs Nominal

Compensating for increases in ‘cost of living’ can be complicated. Employees and employers negotiate nominal wages. Nominal are the numbers we see and use everyday.

Rises in the cost of living and productivity increases are an unknown variable – so employees and employers need to make assumptions about what these may be.

There is then a conflictual nature over who receives the increased productivity. Rises in the CPI can be attributed to the conflict between labour and capital as the groups seek to battle over the productivity increases.

To adjust for movements in price indexes (in this case CPI) economist choose a reference point and convert the dollars into that year. The purpose of tracking prices with this index is to try and account for whether our economy is increasing output. Is GDP rising because of price increases or is it rising because we are producing more? Adjusting figures from nominal to real allows us to answer that question.

The Queensland public sector is currently negotiating with its public sector employees. Public sector employees had a 2.5% pay increase on 1 July 2020, however had a pay freeze in 2021 (with the Queensland government citing covid as the reason) and the increases resumed at the beginning 2022 and a ‘catch-up’ payment in July 2022. You can see below the ‘catch-up’ payment in real terms failed to match 2019/20 rates.

The QTU memo to members states the offer as follows:

Increases to wages and existing allowances (normally adjusted in accordance with wage increases) as follows: 4% payable from 1 July 2022; 4% payable from 1 July 2023; and 3% payable from 1 July 2024.

A cost of living adjustment: (COLA)
In each year of the agreement, if annual inflation (at March Quarter, Brisbane Consumer Price Index (CPI)) exceeds the base wage increase, a one-off lump sum payment equal to the difference between the CPI increase and the base wage increase (up to 3 per cent) will be paid to all employees at the end of that year of the agreement.

In the first graph I adjusted teacher wages into 2019/20 dollars. To do this I hade to make some assumptions about future CPI increases. I assumed 5.1% for June quarter 2022 – 2025 (note: June quarter 2022 data isn’t released until later this month)

I gave the 2019/20 real figure a score of 100 and tracked the movement in wages. There are two aspects to wage increases one is the percentage increased negotiated for each year and the other is increases in an individuals step based on experience. This analysis tracks the percentage increases and doesn’t account for movement in steps.

In 2021 the Queensland government initiated their wages freeze, there was a nominal increase at the beginning of 2022 though it failed to maintain the real value of wages. The second increase or ‘catch-up’ payment was delivered on 1 July 2022 and the real value of wages rose though it failed to reach the level in 2019/20. From that point on the real value of the Queensland governments offer has wages falling.

The next graph accounts for the Cost of Living Allowance (COLA) payment. Because the COLA doesn’t add to wages you can see the COLA in real terms diminishes as real wages fall.

The QTU wrote to members advising them

Executive was clear that the offer is substantial and includes initiatives that respond to the Union’s priorities as determined by members. It therefore recommends acceptance of the offer to members.

A real wages cut doesn’t sound like a ‘substantial’ offer to me. This decision was made by the union executive who are

The Executive, which is the Union’s decision-making body between meetings of State Council, is made up of the six senior officers and 14 rank and file activists elected by Council, from across the state.

In my experience with union bodies the paid executive have little to no understanding of accounting for real wages and often accept government arguments of needing to reduce deficits! These lousy offers (and Queensland is a more ‘generous’ offer than other states) are driven by ideology of treasury departments that think real wages need cutting to keep inflation in check and reduce deficits. (Which I covered why they don’t in my last blogs)

Members should reject these lousy offers and push for representatives to put forward CPI increases as a minimum toward wage increases! If the paid executive disagree they should be replaced.

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