Need To Fix inflation? Unions Are The Answer


The IMF’s World Economic Outlook, published on 15 April, contains, for the first time a warning about Australia’s inflation outlook. The IMF lists Australia along with Japan, Korea and Thailand as needing “to act to prevent a persistent decline in inflation expectations.”

Commentary on the report in the media noted that the IMF were worried that lower inflation expectations risked becoming a vicious cycle with low inflation expectations leading to lower wage growth, dampening consumer spending and fuelling even lower inflation. This is the deflationary spiral currently being experienced in Japan.

It is no coincidence that lower wage growth and lower inflation follows years of falling union membership across OECD countries. Since the 1980s governments and businesses have pursued aggressive anti-union policies designed to weaken the power of working people to act collectively to increase their share of income and wealth. These policies have been effective, union membership has declined dramatically and the share of wealth going to those already wealthy has increased.

The December 2014 wage-price index released by the ABS showed that wage growth was at its lowest level in Australia since records began. In that same quarter the days lost to industrial action were a record low for that quarter. As industrial action has decreased so has wage growth.

We are now in a situation where the deliberate policy of conservative governments to weaken the power and influence of collective union arrangements has caused such a drop in wage rates that the entire economy is threatened.

Stronger unions, with workers acting collectively to improve their wages and standard of living, would improve the inflationary outlook and consumer spending. This is not possible in an environment where a Federal government uses the coercive power of the State to seek to destroy the ability of unions to act collectively and organise workers.

Our economy needs industrial relations legislation that strengthens the hand of workers to collectively organise, including the right to vote to say that anyone who wants to work at their enterprise and benefit from their collective efforts needs to contribute to its upkeep. 

Governments, both State and Federal, also must revisit their wage policies which mandate annual caps of 2.5% or 3% on wage offers to public sector employees. This is necessary not only to increase the spending power of that large number of employees employed by government but also because of the signal it sends to the private sector. Private sector employers, in my experience, do not like to negotiate higher wage rises than the public sector.

This change in direction requires a fundamental rethink of 30 odd years of neo-liberal economic orthodoxy which has preached that economic growth is achieved by driving down wage costs. Whilst this had led to short terms profit and wealth increases for the top 10% it has led to increase poverty for members of our union – cleaners, hospitality workers, early childhood educators and so on. This now threatens to infect the entire economy. Policy makers should take note.

David McElrea

Assistant Secretary, United Voice NSW 

David McElrea is the Assistant Secretary of United Voice NSW. United Voice represents 130,000 Australian workers in a range of industries including cleaning, childcare, health and aged care, hospitality, security and manufacturing.

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  • commented 2015-04-16 18:33:41 +1000
    I wish you had written this a week ago; I just wrote a huge essay for my postgrad IR subject discussing this very thing! You could have been in my reference list! Thank you for an insightful piece – I hope the policy makers do take note – unconventional means such as this just might be what we need to get things going again.