Australian employees have been experiencing declining wage growth since the 2008 Global Financial Crisis (GFC). However, the housing market, utilities and the overall cost of living continues to rise so there has been accumulating pressure applied to workers. The current candidate shortage within the Australian job market could be a major contributing factor in forcing wages to rise.
The below table from the ABS indicates the downward trend in wages since the GFC.
Reasons to Expect Wage Growth
The Australian Financial Review recently reported that three-quarters of the nation’s largest accounting firms are having difficulty recruiting and retaining staff. In Business Services and Tax, employees that we’re speaking with nationally are telling us that the last 12 months has been their busiest period ever, yet their salaries have stagnated or grown minimally.
Across numerous industries, money is making a bigger difference to candidates than ever because they are linking it with the perception of their value. In other words, they feel they’re putting more time in but not getting the money to recognise it.
Evidently, businesses are going to need to offer attractive salaries to retain and hire staff in this current market. A number of organisations are already adapting to this – law firm Thomson Geer recently announced an average salary increase of 10 per cent for their base of over 500 employees across Sydney, Melbourne, Brisbane, Perth and Adelaide. This is significantly higher than the national wage growth average of the past two years of 1.5 per cent.
Employers don’t generally give pre-emptive pay increases. However, maintaining this kind of conservative approach is going to prove costly for organisations if they don’t adjust to the market conditions. The alternative will be substantial disruption and pressure as a result of losing staff, in addition to the significant costs associated with making new hires, especially in times when there is a candidate shortage. As Digital Finance Analytics principal Martin North said in a recent interview with news.com.au, “the financial stress is very high at the moment, the cost of living is rising and mortgages are rising, but we’ve had very little income growth.”
We’re entering a situation whereby wage growth is going to be driven up by a job market that favours candidates and the increasing number of employees seeking new roles with higher salaries. Individuals should take the opportunity to be proactive about negotiating salary with their current employer if they are dissatisfied, or alternatively seeking a new job. Conversely, companies should be taking active measures to incentivise their employees to stay.