Did Labor really cut real wages?

Writing in the Australian today, the Prime Minister says:

Average real wages have risen by 17.9 per cent since March 1996, compared with a fall of 1.7 per cent under the previous Labor Government.

Can anyone find evidence supporting the suggestion that real wages actually fell from March 1983 to March 1996? When talking about real wages in the past, the PM has relied on ABS quarterly average earnings data, so I expect that this is what is being referred to here. However, when I put the ABS CPI (6401.0) and average wage (6302.0) data together, I get increases of around 6% between the Nov 83 and Feb 96 quarters (the average wage series only starts in Nov 83). Hardly rapid growth, but there’s plenty of daylight between +6% and -1.7%.

Update: With help from Mark Davis, I’ve worked out what’s going on. The PM is referring to the trends in average wages, not average full-time wages (you can get Howard’s numbers by combining these national accounts wage numbers with this CPI data). The obvious rebuttal is: of course average wages fell over this period, there were a whole lot more people working part-time in 1996 than in 1983. When you compare apples with oranges, don’t be surprised if the answer looks pear-shaped.

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9 Responses to Did Labor really cut real wages?

  1. I haven’t checked the data, but ‘previous Labor government’ is ambiguous – it could mean the last term in office, the last Prime Minister, or as you have calculated it the whole 13 years. Real wages did fall for a while at least in the 1980s, a deliberate (and reasonably successful) policy to increase employment. Not sure about Keating’s term, but recessions usually aren’t good for wages growth.

  2. Mark Davis says:

    The PM’s 29 August 2005 statement suggests he is using the ABS national accounts measures of compensation for employees and inflation (ABS 5206.0) rather than the ABS average earnings survey (ABS 6302.1) and CPI.

  3. mister z says:

    Is Howard’s +17.9% (real) from the same series average earnings survey then? or perhaps a fiddle using AWOTE?

  4. Crocodile says:

    Does Howard’s 17.9% also include the skyrocketing corporate pay packets often in the millions for the odd CEO. I suppose it would only take a few of these to seriously skew the figures. A look at real wages growth in deciles may be a little more informative.

  5. Average earnings have increased by more than median earnings, but increases have been spread across all occupation groups.

    Howard has also been redistributing income – the financial benefits of the last decade have been spread across the income spectrum, as Ann Harding‘s research shows.

  6. George says:

    Howard the tired ‘Old Man” up to his tired old deceitful antics again.I don’t believe a word of what the “Lying Little Rodent” utters!

  7. a student says:

    He has no credibility. It is just like the time he said that government spending was only inflationary if the budget was in deficit. Plainly deceitful, or stupid. He is not stupid.

  8. allen says:

    how is the real wage even constructed? the quarters on which AWOTE and the CPI are collected are different. anyone care to answer

  9. Andrew Leigh says:

    The two series are only a month out of sync – I agree that this matters, but it’ll only affect the second decimal point.

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