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low wages growth is a problem for economists trying to explain it, and an even bigger problem for politicians trying to work out what to do about i

The latest figures show wages growth is at its slowest pace in 19 years - which is as far back as the official data series goes.

The 1.9 per cent annual rise in the price index for wage rates was the smallest since the series was first published by the Australian Bureau of Statistics in 1997.

Other longer-running measures of earnings suggest wages are currently rising about as slowly as they have for around half a century.

Which is a bit surprising, with unemployment still relatively low.

Before the 1990s recession, economists would have judged the current unemployment rate of 5.6 per cent to be consistent with wage inflation of around eight or nine per cent.

After the recession, against the background of decreased job security and more flexible wage-setting processes, that guess would have been more like four or five per cent.

But wages are behaving as if the economy is in recession.

This is a problem for economists, who have to re-examine their forecasting models, but a bigger problem for politicians who will be held responsible for stalling wages and household spending power.

And it's not just wage rates - it's about earnings.

About three quarters of the modest 1.4 per cent growth in the number of people in employment over the past year has been achieved by sharing the available hours, which rose only 0.3 per cent, among a larger pool of workers.

As a result, average earnings are growing at an even slower pace than wage rates.

That will do nothing to change the perception that the benefits of economic growth are not being shared fairly, but boosting wages growth will not be easy.

We no longer have economy-wide "flow-on" wage rises, and minimum wage rises are, well, the bare minimum.

Unions no longer have the influence they did.

The easy availability of short-term migrant workers has kept a lid on wage rates.

And workers are keenly aware that many jobs can readily be 'offshored' if they get too insistent about their pay rates.

Even the multi-billion dollar corporate tax cut promised by the government will do precious little.

The best-case scenario in Treasury's modelling of the planned handout shows a real wage rate rise of a bit over one per cent, spread in tiny increments over two or three decades.

But while policy options are limited, Donald Trump's success means our leaders, and would-be leaders, will grasp for whatever looks as though it might work - clampdowns on visas for foreign workers, infrastructure spending to pump up demand for labour, or fast-tracking private sector investment.

And if none of those do the trick there are plenty of marginalised groups to use as scapegoats or distraction.

Either way, slow wages growth will move to the centre of the political stage and will be tough to get out of the limelight.

 
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