Question: Are Australian Workers Just Too Expensive For Their Own Good?

Picture: Getty Images

The revelations this morning that SPC workers get 9 weeks holidays a year and a 5-day weekend for Melbourne Cup Day were part of the reason why the Abbott Government knocked back Coca Cola Amatil’s bid for $25 million in support bring to light an interesting aspect of the Australian economic landscape.

That is, as a result of the accord that the Hawke and Keating government put in place back in 1983 (and the various iterations since), Australia has been a nation where workers regularly enjoy wage rises. At least in nominal terms and, for a long time, real (inflation adjusted) terms.

It’s great for the fabric of our society and it’s great for workers but in an increasingly globalised world where competition for the capital and investment dollars of global multinationals is fierce, is the cost of Australian labour simply too high?

Some of the entitlements workers at SPC Ardmona have under their workplace agreement would seem ridiculous for workers to negotiate now and in other industries, workers must be looking askance at their award compared to those of SPC workers.

The AFR reports that:

“Wages at the ailing plant are between 38 per cent and 58 per cent above ‘modern award’ levels and have increased by 29 per cent since 2005.”

That, on top of an Australian economy that is already getting expensive as the chart from the ANZ shows below, puts workers “out of the market”:

But without knowing the full history of the 9 weeks off or allowance for parcels over 15 kilos, it is likely that things like the day off before Melbourne Cup Day (“Food Preservers’ Picnic Day”) would have been traded by workers, the union and the company in the past for productivity increases or some other deal at the plant.

So to criticise ex-poste for deals that made sense at the time but seem unusual now is not really fair on the parties involved.

It brings to mind a point that RBA Deputy Governor Phil Lowe made in November last year that lower living standards might be our future. Lowe said,

Over the next decade or so, if we are to achieve anything like the type of growth in real per-capita income that we have become used to, then a substantial increase in productivity growth will be required. If this lift in productivity growth does not take place, then we will need to adjust to some combination of slower growth in real wages, slower growth in profits, smaller gains in asset prices and slower growth in government revenues and services – in short, slower growth in our average living standard.

So while the specific criticism of SPC workers may seem unfair what is fair – and where the Abbott Government is clearly intending on heading – is that workers, unions and managers of companies like SPC and Toyota are being asked to look to their entitlements and, it seems, ask if they are still relevant to today’s free flowing global capital and investment environment.

It’s a conversation that is going to get uncomfortable for the economy and for workers.

But it’s a conversation that is going to have to be had before the Federal Government is going to help ailing businesses and industry.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.