Published: June 26, 2020

Employees in Australia, as in many other countries, have experienced declining wage growth since the 2008 Global Financial Crisis (GFC). This decline has received much attention from policymakers and central banks because of the social impact it can have by making households vulnerable to financial distress.

However, few studies have investigated how the decline in wage growth affected specific groups of employees. A new Life Course Centre Working Paper examines the extent to which low wage growth varied among Australian full-time employees over the 2001-2018 period, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey.

The Life Course Centre-supported paper is authored by Professor Guyonne Kalb and Dr Jordy Meekes of the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne. Professor Kalb is an Associate Investigator and Dr Meekes a Research Fellow in the Centre. Their study focusses on two key research questions.

First, to what extent is wage growth explained by individual and job characteristics? The findings show that wage growth appears largely determined by employee characteristics, such as age, education, employment contract, occupation and industry, while gender appears less important.

Second, how did the role of employees’ characteristics in wage growth change over the period 2001-2018, focussing on the GFC and subsequent slow-down in wage growth? The findings suggest decreasing returns to education and an increasing importance of specific occupations. For example, employees with occupations that are more cognitive and less routine, such as managers and professionals, experienced relatively high wage growth from 2014 onwards. The paper suggests that employees in insecure casual jobs receive a wage growth premium during economic upturn and a penalty during economic downturn.

Overall, these results show that wage growth inequality between employees is relatively independent of where the economy is in the business cycle, and that the differences between employees are more substantial than the year-to-year variation. Taken together, the findings are relevant for policymakers, as they inform which sub-groups of employees are at most risk of lower wage growth.

You can read the full Working Paper, ‘Wage Growth Distribution and Changes Over Time: 2001-2018’, here.