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With inflation soaring and the Reserve Bank of Australia (RBA) delivering yet another interest rate rise in November, workers may need to demand a wage rise ahead of 2023 to avoid a plunge in their real wage.
While Treasurer Jim Chalmers said in a recent statement that inflation will peak at 7.75% in the December quarter of 2022, this seems unrealistic given there are no real signs of cost pressures easing in Australia.
The Consumer Price Index (CPI) rose 1.8% in the September 2022 quarter to be 7.3% higher than a year earlier, according to data from the Australian Bureau of Statistics (ABS). The annual rate of inflation was the highest rate in 32 years, pushed up by housing and energy costs, according to the Australian Bureau of Statistics (ABS).
Housing costs remain high and grocery prices are still rising. In addition, the restoration of the fuel excise to 46 cents per litre, up from 22 cents, in October will add to fuel prices in the December quarter and could push annual CPI closer to 10%, well beyond the Federal Government’s expectations. According to forecasts from the RBA, inflation is forecast to average 5.75 per cent in 2022–23, peaking at 8.0 per cent in the December quarter. Inflation is then expected to average 4.75 per cent per cent over 2023, much higher than wages growth, which remains stuck below 2% at near-historic lows.
Nationwide, data from the ABS shows that average wages grew just 1.9% over the 12 months to May 2022, whereas company profits jumped 28.5% over the year to June 2022. Employers can afford pay rises, so employees need to be persistent, and ask for what they think is fair and reasonable.
Workers should consider acting now to avoid their real wages being eroded further. Many Australians have yet to receive a decent wage rise this year (or in recent years) despite soaring living costs – and the fact is that many companies can afford to grant more generous pay rises.
While the Reserve Bank governor Philip Lowe has said he wants wages growth to be capped at 3.5%, that is unrealistic given inflation is so high and the unemployment rate sits at just 3.5%, a 50-year low. Job ads remain at elevated levels compared to pre-pandemic levels and employers can’t get the staff they need. As the national skills shortage highlights, the value of workers has risen in this tight jobs market.
In this economic environment, employees need to be assertive and ask for a bigger pay packet. If your boss denies your request for a wage rise, be firm and state your reasons why you are valuable to the organisation and give examples of your contributions and productivity. Be courageous; you have nothing to lose, but a lot to gain from asking for a pay increase. If you are prepared to move employers to get a more attractive salary, tell that to your employer. Employers may listen more carefully, knowing that they may not be able to easily replace you in this tight labour market.
More generally, employers need to work on their employee value proposition to motivate and keep their staff from leaving. Apart from granting a decent pay rise, this could include offering workplace flexibility in terms of hours and location of work, such as offering some opportunity to work from home, which employees have become used to through the pandemic. It’s also important to offer learning and development opportunities, which employees value as part of their career progression and adding to job satisfaction.
If employees don’t feel happy, they are more likely to look for another job. Many workers are ready to move on to increase their real wage if their existing employer won’t give them what they deserve.
Kris Grant is the CEO of management consultancy, ASPL Group
Shandel McAuliffe
Shandel has recently returned to Australia after working in the UK for eight years. Shandel's experience in the UK included over three years at the CIPD in their marketing, marcomms and events teams, followed by two plus years with The Adecco Group UK&I in marketing, PR, internal comms and project management. Cementing Shandel's experience in the HR industry, she was the head of content for Cezanne HR, a full-lifecycle HR software solution, for the two years prior to her return to Australia.
Shandel has previous experience as a copy writer, proofreader and copy editor, and a keen interest in HR, leadership and psychology. She's excited to be at the helm of HR Leader as its editor, bringing new and innovative ideas to the publication's audience, drawing on her time overseas and learning from experts closer to home in Australia.
