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Wages must be reduced


five dollar notes, moneyI recently attended a forum and got talking to the chief economist of one of the big four banks. My question to him was very simple. “Can wages and rents be sustained in Australia”? We were of course talking in the retail context.

As I learnt from one of my mentors a year or two ago, and now confirmed by this learned man, the answer was no.

He didn’t go so far as to say that wages would come down, but he did say that technology would drive wages down. For example, cashier-less checkouts.

I was not going to debate the issue – checkout wages are a factor, but it is minimum wages across the board that hurts.

The following day I posed the same question to the delegates.

Outrage is too strong a word. Dismissive will probably have to do. Or pity – only a person of unsound mind would suggest a notion so preposterous – that wages must come down.

Through Wikepedia I researched the official minimum wage in 197 countries and territories. This is not an exact science. The study was conducted in 2012 when the US dollar was weaker and some countries have complex minimum wage structures (India has more than 1200!).

But those who prepared the study did their best. They took gross wages before tax and social security contributions. They excluded paid days off, public holidays, sick pay, and annual leave.

Warts and all (and there are many), the findings can best be described as a rough barometer of international minimum wages.

And this is what it looks like taking just the top thirteen countries.

Screen shot 2013-11-15 at 9.19

A few comments.

The annual wage rate in Australia is more than 12.5 per cent higher than the next country on the list.

Australia is 67 per cent higher than the UK, and 120 per cent higher than the US.

Casting one’s eye down the hourly rates, a similar picture emerges.

Now have a look at the working week. Only two countries have shorter working weeks. And Canada’s working week is 16 per cent longer than ours.

If you are tempted to comment on the veracity of the numbers, you have missed the point.

The point is that we are hopelessly out of kilter with the real world, whichever way we look at it.

Dozens of extenuating factors can be cited – our wonderful way of life, unparalleled medical facilities, a sound education system, and the list goes on (although many complain that we need better).

But the bottom line is the top line in the table.

We are an expensive country and we cannot sustain our wage structure.

Something has to give.

Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at or 0414 631 702








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